2008 Annual Report

Form in color: the Audi R8 V10 2009 Financial Calendar

Quarterly Report, 1st quarter 2009 April 27, 2009 Annual General Meeting May 13, 2009 Customer Center at Audi Forum Neckarsulm Interim Financial Report July 31, 2009 Quarterly Report, 3rd quarter 2009 October 30, 2009

Audi 2008 ANNUAL REPORT

PIONEERING SPIRIT A new lightness in car design. AUTHENTICITY Clint Eastwood makes self-will his trademark. ORIGINS 100 years of Audi. EFFICIENCY Endurance test for TDI clean diesel. PROGRESSIVENESS Technology meets design. One annual report – 49 x Vorsprung.

Vorsprung durch Technik www.audi.com

AUDI AG Financial Communication/ 85045 Ingolstadt Financial Analysis Communications Germany I/FF-12 I/GP Audi 2008 Annual Report Phone +49 (0)841 89-0 Phone +49 (0)841 89-40300 Phone +49 (0)841 89-34084 Fax +49 (0)841 89-32524 Fax +49 (0)841 89-30900 Fax +49 (0)841 89-44040 email [email protected] email [email protected] email [email protected] Form in color: the Audi A5 Cabriolet 2009 Financial Calendar

Audi 2008 ANNUAL REPORT

Vorsprung durch Technik www.audi.com

Audi 2008 ANNUAL REPORT

Vorsprung durch Technik www.audi.com

2008 2007 Change in %

Production Cars 1,029,041 980,880 4.9 Engines 1,901,760 1,915,633 -0.7

Vehicle sales Cars 1,223,506 1,200,701 1.9 Audi brand 1,003,469 964,151 4.1 Germany 258,111 254,014 1.6 Outside Germany 745,358 710,137 5.0 Lamborghini brand 2,430 2,406 1.0 Other Volkswagen Group brands 217,607 234,144 -7.1

Employees Average 57,533 53,347 7.8

Revenue EUR million 34,196 33,617 1.7 Profi t from operating activities EUR million 2,772 2,705 2.5 Profi t before tax EUR million 3,177 2,915 9.0 Profi t after tax EUR million 2,207 1,692 30.4

Operating return on sales Percent 8.1 8.0 Return on sales before tax Percent 9.3 8.7 Return on investment Percent 19.8 18.6

Total capital investments EUR million 2,486 2,115 17.5 Capitalized development costs 547 497 10.1 Depreciation and amortization EUR million 1,908 2,287 -16.6

Cash ﬂ ow from operating activities EUR million 4,338 4,876 -11.0

Balance sheet total at Dec. 31 EUR million 26,056 22,578 15.4 Equity ratio at Dec. 31 Percent 39.6 37.0 //////////////////////////////////////////////////////////////////////////////

Photos: Klaus Becker (cover), Claudia Kempf, Andreas Teichmann (pages 4 and 5) //////// EDITORIAL Kind regards I wishyouaninteresting read. andentertaining achieved inthepastyear. tion aboutoureconomicdevelopmentandtherecord figures and future. Inaddition,thefinancialsectionprovides informa- leading authorsprobe intriguingaspectsofthepast,present All thesequalitiesare mirrored inourAnnualReport, inwhich approach –innovative,progressive, cosmopolitanandresponsible. is certain: We willsteadfastlyadhere toouruniqueAudi nomic crisis. Whatever happensinthiscurrent year, onething All thesame,wewere notleft unscathedbytheglobaleco- closer toachievingourambitiousstrategicobjectives. asm forourexceptional carsonceagainbrought usawholelot set: athoroughly successfulyearinwhichpassionateenthusi- 2008 turnedouttobeexactlyaswehadplannedfrom theout- derivativeversionsontothemarket.sporty update ofourcore carlines A3andA6,brought numerous SUV,wecarriedoutathoroughand theAudiQ5performance completely newvehicles,suchastheA3Cabriolet,A4Avant a large numberofattractive newmodels. Aswellasunveiling Audi brandtookitsproduct toanewlevelbyadding portfolio record-breaking year. Andthiswasalsotheyearinwhich million barrier, thecrowning achievementofa13th successive first timeever, Audi’svehicledeliveriesbroke through theone 2008 wasaremarkable yearinquiteanumberofways. Forthe Chairman oftheBoardManagement Rupert Stadler //////// REPORT OF THE SUPERVISORY BOARD ///////////////////////////////////////////////////////////////////////////////

April 10, 2008. All ten sitting employee representatives on the Supervisory Board were re-elected. The election of stockholder representatives took place at the Annual General Meeting on May 7, 2008. Holger P. Härter, Prof. Ferdinand K. Piëch and Dr. Wendelin Wiedeking were elected as new members of the Supervisory Board. The term of office of all Supervisory Board members ends with the close of the Annual General Meeting, which is to give dis- charge for the 2012 fiscal year. At its constituent meeting on May 7, 2008, the Supervisory Board re-elected Prof. Dr. Martin Winterkorn as its Chairman and Berthold Huber as Deputy Chairman. The Negotiating Committee pursuant to Section 27, Para. 3 of the German Codetermination Act and the Audit Committee pursuant to Section 5.3.2 of the German Corporate Governance Code were also elected.

In the past fiscal year, the Board of Management provided the Supervisory Board with regular, up-to-date and comprehensive accounts of its actions. All decisions fundamentally important to the Company were discussed in depth between the Board of Management and the Supervisory Board. The Supervisory Board reviewed and held extensive discussions with the Board of Management on the economic situation of the Company, the development of sales markets, the business policy and risk management approach, together with the risk exposure of the Company, at Prof. Dr. rer. nat. Martin Winterkorn Chairman of the Supervisory Board quarterly meetings throughout 2008 and also on the basis of regular, detailed oral and written reports from the Board of Management. All members were present at more than half of the meetings. The Supervisory Board reached decisions on business developments requiring urgent consideration by written circular. The members of the Presid- ing Committee held extensive consultations before each Supervisory Board meeting. The Negotiating Committee did not need to be convened in the 2008 fiscal year. The Audi Group succeeded in maintaining the growth of re- The principal topics considered at the Supervisory Board’s cent years in the 2008 fiscal year, amid an increasingly dif- meetings were in particular the financial crisis, its direct ficult economic environment. In addition to establishing a impact on the real economy, and the currently unforesee- new record for manufacturing output, the Company de- able consequences for the automotive industry and in par- livered over one million premium cars of the Audi brand for ticular the Audi Group. Other major issues for consultation the first time in its history. Moreover, revenue and key earn- included the Company’s technological responses to the ings ratios reached new all-time highs. The Supervisory Board continuing debate about CO2 emissions, and extensive dis- would like to take this opportunity to thank the manage- cussions about market opportunities and risks for the Audi ment, the elected employee representatives and the staff core brand based on the current and future model range. for everything they did to make this achievement possible. In addition, the Supervisory Board devoted considerable All seats on the Supervisory Board were up for re-election attention to the mandatory offer by Porsche Automobil during the past year. With the close of the Annual General Holding SE, Stuttgart, to the shareholders of AUDI AG Meeting on May 7, 2008, Dr. Thomas R. Fischer, Dr. Claus on September 25, 2008 and, jointly with the Board of Helbig and Dr. Axel Freiherr von Ruedorffer retired from Management of AUDI AG, published an opinion pursuant the Supervisory Board. The Supervisory Board greatly ap- to Section 27 of the German Securities and Takeover Act preciated their constructive advice and critical questioning, (WpÜG) on October 16, 2008. In view of the financial and voices its sincere thanks and indebtedness to Dr. Fischer, valuations available at the time of the drafting of the reso- Dr. Helbig and Dr. von Ruedorffer for the work they accom- lution and the trading prices of Audi shares during the peri- plished. The ten employee representatives were elected on od of the offer, the Supervisory Board and Board of Man-

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agement of AUDI AG were able neither to recommend nor Board were presented with the documentation for the An- to advise against acceptance of the mandatory offer. In or- nual and Consolidated Financial Statements, together with der to avoid any hint of a conflict of interest or influencing the corresponding audit reports by the auditors, well in ad- the debate on the drafting of this opinion in any way, the vance of the meetings on February 25, 2009. The auditors Supervisory Board members who supervise Porsche Auto- reported in detail to the meetings of the Audit Committee mobil Holding SE or belong to the Board of Management of and Supervisory Board on the key findings of their audit, the holding company each abstained from the vote when and were available to answer questions from the members the content of the opinion on the mandatory offer was of each committee and provide additional information. On being decided. the basis of the audit documents presented to it, its dis- The economic environment at the end of the fiscal year cussions with the auditors and its own conclusions, the rendered it impossible to plan reliably for the long term. Audit Committee recommended to the Supervisory Board The Board of Management will therefore submit specific at the meeting of the latter on February 25, 2009 that the proposals for financial, human resources and investment Annual and Consolidated Financial Statements be signed planning for the approval of the Supervisory Board at the off. The Supervisory Board accepted this recommendation start of the 2009 fiscal year. and signed off the Annual Financial Statements prepared All financial, human resources and investment decisions by the Board of Management as well as the Consolidated required in the short term in order to maintain the product Financial Statements. The Annual Financial Statements are initiative and maintain the growth strategy were approved thus established. by the Supervisory Board following detailed discussions on November 24, 2008. At this meeting, the Supervisory The following change to the composition of the Board of Board moreover approved the remuneration system for the Management of the Company took place in the past fiscal Board of Management, including the principal contractual year: Effective end of February 22, 2008, Ralph Weyler, elements, as well as the content of the annual Declaration Member of the Board of Management for Marketing and of Compliance pursuant to Section 161 of the German Sales, left the Board of Management of AUDI AG. The Su- Stock Corporation Act. pervisory Board takes this opportunity to thank Mr. Weyler for his work on the Board of Management of AUDI AG. “In addition to establishing a new Effective April 1, 2008, Peter Schwarzenbauer succeeded record for manufacturing output, the Ralph Weyler on the Board of Management of AUDI AG. Company delivered over one million For the period February 23, 2008 through March 31, 2008, premium vehicles of the Audi brand Rupert Stadler had additionally assumed responsibility for for the first time in its history.” the Marketing and Sales Division. Prof. Dr. rer. nat. Martin Winterkorn The Board of Management expects a further deterioration The Audit Committee duly met during the past fiscal year in the economic environment worldwide in 2009, with the and considered at length the Annual and Consolidated entire automotive industry particularly affected. Nor will Financial Statements for 2007, the Company’s risk man- the Audi Group be able to resist this trend altogether. The agement, the prevailing situation at the end of 2008, and Board of Management nevertheless believes that the Com- the process initiated by the Board of Management to es- pany is in a strong strategic position to rise to the major tablish a compliance organization. In addition, the com- challenges that lie ahead both actively and successfully. mittee considered detailed analyses of potential risks and Wide-ranging, long-term measures already implemented burdens from the current economic crisis and the continu- with a view to optimizing costs and processes will help the ing high volatility of international raw materials and cur- Company to respond swiftly and appropriately to changes rency markets. in demand. The Company furthermore has a youthful, attractive model range, which will continue to stimulate PricewaterhouseCoopers Aktiengesellschaft Wirtschafts- the market and will be further expanded in 2009. prüfungsgesellschaft was elected by the Annual General The Supervisory Board will actively and constructively con- Meeting on May 7, 2008 as auditor of the accounts for the tinue to support and advise the Board of Management as it 2008 fiscal year. The Supervisory Board issued the audit seeks to realize its growth strategy. assignment to this firm of auditors directly after this election. The firm of auditors confirmed the Annual Financial Ingolstadt, February 25, 2009 Statements of AUDI AG and the Consolidated Financial Statements of the Audi Group, as well as the Management Reports for AUDI AG and the Audi Group for 2008, and in each case issued its unqualified certification. Prof. Dr. rer. nat. Martin Winterkorn The members of the Audit Committee and Supervisory Chairman of the Supervisory Board

3 Photo: Claudia Kempf //////// THE BOARD OF MANAGEMENT ///////////////////////////////////////////////////////////////////////////////

AXEL STROTBEK MICHAEL DICK RUPERT STADLER Finance and Organization Technical Development Chairman of the Board of Management ///////////////////////////////////////////////////////////////////////////////

DR. WERNER WIDUCKEL FRANK DREVES PETER SCHWARZENBAUER ULF BERKENHAGEN Human Resources Production Marketing and Sales Purchasing /////////////////////////////////////////////////////////////////////////////// ///////////////////////////////////////////////////////////////////////////////

PROGRESSIVENESS Ambra Medda and Rupert Stadler above the rooftops of New York. PAGE 26

CHARISMA The Audi TTS journeys into the colorful life of Montreal. A photo portrait based on a young author’s short story. PAGE 55

6 /////// CONTENTS ///////////////////////////////////////////////////////////////////////////////

ONE CENTRAL THEME – MANY FACETS Each story captures one “Vorsprung” – one innovative attribute

12 DEVOTION 42 ORIGINALITY Reality and illusion Fit for an emperor DTM pro and professional gamer compete on An unconventional Audi dealer offers the Nordschleife and the game console a beauty oasis and shopping center 18 PIONEERING 48 PRECISION Scaling the heights SPIRIT No C is too high for the young and highly The lightness of being acclaimed tenor, Juan Diego Flórez Audi sets standards worldwide with its innovations in automotive lightweight design 52 WINNING 26 PROGRESSIVENESS MENTALITY “Our design is like a fingerprint” “Timo wanted this title” Audi boss Rupert Stadler meets with the Audi defended its DTM title in 2008. director of Design Miami/, Ambra Medda At the wheel: Timo Scheider 32 UNDERSTANDING 55 CHARISMA Service in the taiga Global cities Audi Service can be relied upon worldwide – Montreal, Sydney, Cape Town: a visit to the Siberian city of Novosibirsk unique cities in words and pictures 36 PSYCHOLOGY 74 AUTHENTICITY The power of color “Today, everyone’s so exalted” Experts decipher the effect colors have – Clint Eastwood has changed, while staying even to the benefit of carmakers true to himself

CHARACTER Three different covers – one Audi Annual Report. Whether Audi Q5, R8 V10 or A5 Cabriolet: Each model has its very own character – expressed slightly differently depending on color. The Audi 2008 Annual Report is published with three different covers, each featuring one of these brand-new models.*

* Fuel consumption and emission figures at the end of the Annual Report. 7 / //////// /////// CONTENTS ///////////////////////////////////////////////////////////////////////////////

ANNUAL REPORT ONLINE Experience these stories in fascinating audio and video formats www.audi.com/ar2008

78 EXTREME 98 SUSTAINABILITY In-house ecosystem EXPERIENCE Star architects create a new and green Beyond the limits generation of skyscrapers There is no final frontier for extreme athletes, looking for answers to life’s questions 102 PRIDE 82 Tracing history in Sant’Agata INGENUITY The pulse of the community in the home of Haute couture for the soul Lamborghini beats for and with the brand Customization reigns: quattro GmbH turns production vehicles into unique specimens 108 IMAGINATION 86 In the land of ideas CULT ICON Audi designers create tomorrow’s vehicle Good vibrations concepts in Munich and L.A. A road trip across the United States on the trail of blues, country and rock ’n’ roll 114 ORIGINS 92 100 years of Audi EFFICIENCY An excursion through the exciting history of Triumphant TDI the Audi brand The TDI passed the ultimate efficiency test in the Audi Mileage Marathon 120 FORESIGHT 94 Opportunities in crisis PERFECTION Audi CFO Axel Strotbek meets with eco- Making our own luck nomics professor Max Otte 24 hours of hard racing at Le Mans showed that teamwork is the key to success 125 SUCCESS Audi Group Finances 2008

23 x VORSPRUNG IN 23 min. 232 Fuel consumption and emission figures 23 news flashes by the minute from the world of the Audi Group 17 INNOVATIVE EMPLOYER 47 AT HOME IN THE WORLD 54 PRODUCTS AND AWARDS 77 AUDI EVENTS 85 HIGH-TECH DEVELOPMENTS 97 TRIUMPHS IN MOTORSPORT 113 ARCHITECTURE, SPORTS, MUSIC

124 VORSPRUNG FOR ALL ETERNITY

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PRIDE Lamborghini is at home in the narrow streets of Sant’Agata. PAGE 102

DEVOTION DTM driver Martin Tomczyk is fully focused – not only behind the wheel of his R8, but also on the PlayStation. PAGE 12

AUTHENTICITY Clint Eastwood may not be a man of many words, but as his recent films show, he still has plenty to say. PAGE 74

9 //////// AUTHORS & ARTISTS ///////////////////////////////////////////////////////////////////////////////

01 SORIN MORAR Photographer, Munich Luckily, Sorin Morar had the foresight to bring Cape Town seagulls’ favorite food to the photo shoot. Initially, only two of the birds showed any interest in the car on the beach. Strong winds kept Morar busy tossing the treats to get the perfect constellation of seagulls and Audi A4 for the shot. “I love capturing the exceptional amidst the ordinary,” says the 36-year-old photographer. PAGE 55 01

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02 MATTHEW COOK Artist and Illustrator, London Cook sketched his first portraits of musicians at jam sessions he attended from an early age in his father’s tow. The 45- year-old artist illustrated the Mileage Marathon and U.S. musical greats for the Audi Annual Report – and came across an old love. As part of London’s punk scene in the late 1970s, he was mad about Blondie. PAGE 86

03 STEFAN NINK Travel Journalist, Mainz 02 03 The 43-year-old journalist normally reports from the Mekong Delta or Swaziland. For a meeting with DTM driver Martin Tomczyk and professional gamer Sascha Appel, Nink traveled to a world that is every bit as fascinating: the Nürburgring. Here he experienced a race between reality and illusion. Tomczyk and Appel piloted an Audi R8 around the Nordschleife – on the game console and on the circuit itself. PAGE 12

04 CAROLE CAPITAINE Motorsports Editor at L’Équipe, Paris For years, the 36-year-old editor has been a fixture at For- 04 05 mula One races. But for the 24 Hours of Le Mans, she even regularly misses out on the Canadian Grand Prix. “Nowhere am I closer to the legend of motorsport than in the rainy French province,” she says. PAGE 94

05 MARC SPITZ Music Journalist and Author, New York The “nerd from Long Island,” as he describes himself, rocked as a DJ in the 1990s before dedicating himself to writing. He worked for the rock and pop magazine Spin, among others. The 39-year-old author, who long lived like a rock 06 07 star himself, is currently researching for a biography of David Bowie. In the meantime, he visited the cult sites of American music. PAGE 86

06 GIORGIO BARRERA Photographer, Milan “To discover this kind of futurism in such a rural setting was fascinating to me,” says the 40-year-old photographer. He took his camera in search of traces of a hot-blooded Italian: Lamborghini. PAGE 102

07 JULIA KARULINA Business Journalist, Moscow “The rhythm of life here is much slower than in Moscow. You don’t call anyone after 9 pm,” exclaimed the 29-year-old journalist on her trip to Novosibirsk. The Moscow native and writer for the business newspaper RBC daily takes a look into the Audi brand’s success in the heart of Siberia. PAGE 32

11 Devotion Reality and illusion Smoking tires, roaring engines. Two Audi R8 cars charge around the track. Professional drivers are at the wheels. The one chases points in the DTM series; his opponent is a professional gamer and develops car racing games. They storm around the Nordschleife – real and virtual. An unusual couple; an unusual race.

Copy Stefan Nink Photos Frithjof Ohm Eifel Mountains is considered to be the world’s most difficult racetrack. Looking down at the R8, Appel seems almost like a child about to unwrap his presents at Christmas. He he engine roars briefly one last time before the waves to the man standing beside the car, Martin Tomczyk, car comes to a stop and Sascha Appel lets his gaze and relays his time of 7:50. Tomczyk smiles – the smile of a T linger over the digital display, as if he wanted to man undaunted by that achievement. burn his time into his memory: 7:50 – less than eight minutes – is pretty good even for a virtual lap around the And what are the two of them doing here? It depends on Nordschleife (Northern Loop). He drags himself out of who you ask. Tomczyk is a professional racing car driver on the racing seat. Stressful? Not really! “Each time is just the Audi German Touring Car Masters (DTM) team and an as much fun as the first!” Appel walks to the window. avid hobby gamer. Today is not the first time he’s had the Parked below is the car he has just driven virtually on a chance to drive a real R8. After all, he was involved in test- PlayStation 3 (PS3): the real Audi R8. He’ll hit the real as- ing the car. Now he wants to see what it feels like to drive phalt this afternoon: nearly 21 kilometers, 73 curves, a the virtual version. Appel, on the other hand, is the Ger- 290-meter change in elevation – the “Green Hell” in the man manager of the GT Explore Studio at the video game

12 GOING FOR IT: DTM driver Martin Tomczyk (left) clocks a super time in the R8. LIKE THE REAL THING: Professional gamer Sascha Appel (right) has only ever driven the R8 in video games.

developer Polyphony Digital, which means he is one of the Station, complete with racing seat, cockpit, pedals and reasons why the newest car models are able to storm television monitor, in the Audi Lounge at the Nürburgring. around the virtual Nordschleife in the upcoming “Gran Turismo 5.” Appel also has a real racing license. The profes- GT is a godsend for racers: There are probably precious few sional driver is a hobby gamer; the professional gamer is a professional drivers alive today who don’t practice on the hobby driver. They are made for each other. console before qualifying. The game is unbelievably impor- And this “Gran Turismo”? It is one of the most successful tant, especially for young drivers going out on a given track racing games of all times. More than 700 different vehicles for the first time, says Tomczyk as he sits down at the wheel and 50 tracks. Breathtaking graphics. And so pedantically of the game console. Yes, it’s about mental training – con- close to reality that the digital Nordschleife deviates from centrating intently for eight minutes, and then repro- the original by no more than five centimeters at any one ducing this later on the track itself. But above all, it’s point. The latest, fifth version of “GT,” as fans like to call about the track layout, characteristics of the corners, their game, is coming out in 2009 with new models and the climbs and drops. “It usually takes 10 to 15 laps to new tuning options. Until then, there’s “GT5: Prologue,” a memorize the circuit during a race. With GT, this can be kind of digital appetizer. It’s already loaded in the Play- significantly reduced.” He is then silent for a while as he

13 Vorsprung Devotion

concentrates on shooting out of the pit row onto the track, sion is so seamless, that it is hard to describe what is hap- his facial expressions and body language changing for an pening to you. After all, it isn’t exactly easy for the average instant. Tomczyk will later say that in terms of concentra- driver to maintain the line in a supercar if they are a little tion there isn’t much of a difference between sitting behind heavy on the gas while flying into a Nordschleife corner. the wheel of the real car or in front of the PlayStation 3. Despite the fact that it’s all taking place on a computer, Admittedly, the PS3 doesn’t offer quite the same white- braking, hitting the guard rail and spinning out still leaves knuckle experience, but even so, you realize that Tomczyk you a bit dizzy. Or truth be told: very dizzy. is entering the zone, isolating himself from outside influences. Everyone around him notices as well: While Tomczyk “It is all very realistic,” says Martin Tomczyk, “the under- is driving, no one utters a word. steer, the oversteer; the increasing computing power If you’ve never tried out another PS3 racing simulation works miracles.” Even though the steering wheel also pulls before, you won’t believe your eyes and ears when you get and bucks, you don’t really “experience” the reactions of behind the virtual wheel of the R8. The game is so realistic the vehicle. “However, the excellent visuals almost com- that you are sucked into and swallowed up by the simu- pletely conceal that.” And if you didn’t already know that lated world within seconds. The shift from reality to illu- the virtual R8 is less sensitive than its real counterpart, you

14 03

01 Ready for action: professional driver and professional gamer in an unusual contest. 02 Simulation in the Audi Lounge: Gran Turismo simulator, complete with racing seat and pedals. 03 Gran Turismo is the ideal “training ground” for racers. Tomczyk also uses the console to practice. 04 The computer game’s detailed graphics blur the boundaries between the real-life and the virtual race track. 04

will when you run wide off the track. “You would break an of course that’s not quite true – the tree from the real axle if you bounced over the curbs in the real thing. In the world is in the game, not the other way round.” What is game, you only lose a few seconds.” true is that GT5 blurs the line between illusion and reality Because computer performance is seemingly unlimited, so well that it is sometimes difficult to remember exactly there are details in GT5 that affect the subconscious in a where you are. way that has little to do with the actual driving. The sun, for example, which either blinds the driver on some parts Which is also one of the reasons why the market for video of the track or plunges the cockpit into deep shadows on games has shifted away from children in recent years: Peo- others. The dirt that flies against the windshield if the car ple under a certain age can’t truly experience highly com- in front of you leaves the road and skids across the grass. plex simulations such as Gran Turismo. In the United And thousands of incredibly realistic trees along the track. States, for example, the average gamer is 35 years old; Appel says that when you drive the real Nordschleife, you’ll the average age in Europe is between 27 and 33. The game notice a lone, distinctive pine tree at one particular spot. industry has long since overtaken Hollywood in terms of “And if you’ve ever played the game before, you think to global sales. And the production costs per game generally yourself, ‘Hey, the tree from the game is really there.’ But amount to tens of millions of dollars, which should come

15 Vorsprung Devotion

AUDI R8 MEETS GRAN TURISMO 5 Find out here what happens when the Audi R8 meets its FIVE QUESTIONS FOR digital counterpart: www.audi.com/ar2008/devotion KAZUNORI YAMAUCHI The Senior Vice President of Sony Computer Entertainment is the creator of the Gran as no surprise given the creators’ devotion and slavish Turismo series. attention to detail in fine-tuning their products.

Of course, virtual reality profits enormously from the The graphics of “GT5 electronic development and design work of automobile Prologue” are incredibly designers: What the Audi engineers develop serves as a realistic. What can be blueprint for the game designers’ models. Artificial intelli- done to make this game gence and driving physics have therefore made quantum even better? leaps in recent years in computer games just like in other Kazunori Yamauchi: GT5 fields. When the decision was taken to give the R8 a virtual will offer a wider selec- counterpart, 20 technicians and designers arrived in Ingol- tion of vehicles and tracks. stadt and took nearly 800 photographs of the vehicle. To And we will provide more make sure the light pattern of the digital R8 matched that features for online com- of the real one, a set of original headlamps was even sent munities. We are also to Japan. Nor were any compromises made when it came to working at full speed to create lifelike graphics sound: To ensure that the virtual sportscar sounds exactly that depict rain and the night. like the real one, the R8 was placed on an acoustic roller dynamometer and the engine sound was recorded at all How do you recreate the cars so realistically engine speeds. The result: When you downshift in the vir- in the game? tual Audi and accelerate, a shiver runs up your spine. Just We need the actual models in order to recreate like in the real car itself. the cars graphically so that they are identical to the originals in every way. With the Audi R8, it “And it’s going to be even more realistic in the future.” was particularly difficult to reproduce the first- So says Sascha Appel, who is back from his lap of the class materials of the interior. It was also not Nordschleife in the R8. He puts his helmet on the table easy to express the standard, the unbelievable and smoothes his racing overalls. Takes a deep breath. precision of the body. And? There really is quite a difference, isn’t there? “You can say that again,” says Appel. Especially because the “Go It’s not just the cars, but also every single tree back to start” option is missing. “You can slowly get your along the Nürburgring is startlingly similar to bearings on the console and if you do slam into the guard- its counterpart in reality. Do such details influ- rail, you just keep going. But one mistake in a real R8 out ence the way the game is played? there – and the race is over. It’s an entirely different adren- We have tremendous respect for the intrinsic aline rush.” To be perfectly honest: Driving in a simulation power not just of the cars but also of nature. is more pleasant,” says video gamer Appel. “And that’s ex- Which is why we carefully consider every actly why professional drivers are professionals!” That, of detail – even if it’s just a bush at the edge of course, was Martin Tomczyk, who is coming in from the the race track. Our passion and our dedication PlayStation with a grin on his face after his latest lap on are not always immediately apparent, but they GT5. “7:42. Now it’s your turn, Sascha!” have a subconscious effect on every player.

What new twists can GT fans expect soon? We are currently working on simulating changing weather conditions that can affect the race. Showdown in reality: And they’re off into the real “Green Hell.” And we will soon also be able to simulate damage to the race cars.

Let’s take a look into the future. What will Gran Turismo 9 have to offer? I find it difficult to predict developments so far in the future. Gran Turismo grows with the automobile industry. When considering the future of GT, we always have to consider the future of the automobile industry as well. Photo: Polyphony Digital Inc. //////// 2 x VORSPRUNG IN //////////////////////////////////////////////////////////////////////////////2min.

01 EUROPEAN INVENTOR OF THE YEAR Prestigious award: AWARD AND THINKERS AWARD AUDI AG is the European Inventor In pioneering the Audi Space Frame (ASF), the Audi brand of the Year. has redefined the benchmark for the key automotive technology of lightweight aluminum construction. In May 2008, the European Patent Office presented AUDI AG with the title of European Inventor of the Year for this technology (May 6, 2008). An ASF vehicle body is not only stronger and safer than its steel counterpart; it also makes the car much lighter and consequently more fuel-efficient. But this prestigious award is just one indication of the company’s innovative prowess. For the fifth successive year, the AUDI AG suggestions scheme was voted the best in the automotive industry by the Deutsches Institut für Betriebswirtschaft (dib). The dib’s “Thinkers Award” honored the innovative networking of ideas management and Continuous Improvement Process methods (March 13, 2008).

02 ATTRACTIVE EMPLOYER AUDI AG is the employer of choice among German students. In high-profile employer rankings compiled by the market research institute Universum (“The Universum German Stu- dent Survey,” 5/2008) and the Berlin trendence Insti- tute (“The German Student Barometer – Business und Engineering Edition,” 8/2008), engineering students voted the company their most preferred employer for the first time in 2008. In September 2008, the company took the opportunity to say thank you to its employees, and their families and friends: Over 130,000 visitors flocked to the Family Day in Ingolstadt.

Popular: The Family Day invited even the youngest visitors to take their first driving lesson.

17 Photos: AUDI AG Pioneering spirit The lightness of being Today’s aviation and space travel wouldn’t exist without lightweight design: Every additional kilogram consumes valuable fuel and resources. The auto industry is caught in the same “weight trap.” AUDI AG has been meeting this challenge since the 1980s. Back then, out-of-the-box thinkers in the company revolutionized body design in volume production by building an aluminum frame structure, whereas today’s engineers work with plastics and magnesium. LIGHTWEIGHT Carbon fiber-reinforced plastics are both ultra-light and extremely robust. Ideal for helicopters like the Euro- copter EC 135, which is partially made of this material.

Copy Klaus Jopp safety and – among the most important – environmental considerations hree, two, one…lift-off! necessitates a radical weight-loss pro- With a deafening roar, the gram. At the top of the list of engi- T Endeavour launches right neering specifications are greater fuel on schedule from the Kennedy Space efficiency and the resulting reduction Center. Its immense fiery tail illumi- in carbon dioxide emissions. It’s an nates the jet-black night sky over empirical formula that any Audi engi- Florida as Flight STS-126 takes off neer can repeat in his sleep: 100 kilo- on its scheduled journey to the Inter- grams less weight on the road means national Space Station (ISS) in mid- about 0.35 liters less fuel consump- November 2008. On take-off more tion per 100 kilometers driven and

than 2,000 metric tons have to over- 8.8 grams less CO2 emitted per kilo- come the force of gravity. And, as on meter. That makes lightweight design every space mission, though materials more important than ever. And that is and structures are subjected to im- why the automobile industry is in- mense forces, they need to be as light creasing its efforts to transfer knowl- as a feather. After all, every gram edge gained from aviation and space launched from earth means money – travel into its own world. lots of money. The launching cost per kilogram can reach up to 100,000 The Audi brand distinguished itself in U.S. dollars. The type of progress lightweight design very early on, with being made using lightweight design its engineers engaged in the area of is evidenced by the midsection of the materials efficiency since the early Space Shuttle’s body, where engineers 1980s. “That’s when the concept for have been able to achieve a 45 per- the Audi Space Frame, an aluminum cent reduction in weight by using frame structure, was developed. Even innovative, fiber-reinforced alloys to its flat components are load-bearing, replace the conventional aluminum revolutionizing the auto industry,” resolution. calls Heinrich Timm, who started this development in 1983 together with a Aeronautics and space travel have al- small team. With visionary foresight, ways been trendsetters in lightweight the company established the Alu- design. Though the issues facing car minum and Lightweight Design Center designers are far more earthbound, in Neckarsulm in 1994. Today, 170 en- they are also caught up in the “weight gineers, materials experts, physicists trap.” The constantly increasing de- and other specialists conduct research mand for more comfort, improved on lightweight automotive design

19 Vorsprung Pioneering spirit

LIGHT IS FAST Developed for the air, used in the water: Thanks to carbon fiber composite materials, this 5.2-meter kayak weighs only 12 kilograms. “A scale mirrors the world at large. What’s light will rise; what’s heavy will fall.” Gotthold Ephraim Lessing

21 WEIGHTLESS Light materials are essential for space travel. Whether it’s the ISS or the Space Shuttle, overcoming gravity is always the first task on the path to outer space. Pioneering spirit Vorsprung

“We make every effort to combine even ‘incompatible’ materials.” Michael Ernst, Head of the Technical Center of the Aluminum and Lightweight Design Center, AUDI AG

here under Timm’s direction. Team alloys, for instance, are intrinsically members from all disciplines are mak- stronger and can withstand greater ing important contributions to tech- mechanical loads. Conversely, engi- nological progress; their thinking and neers are able to design metallic com- experimentation extend across de- ponents that are thinner throughout, partmental boundaries. Experts thereby reducing weight further. “We developing new technologies and don’t just focus on the basic material: processes work in direct contact with We also find ways to manufacture it the project managers developing new industrially and therefore more eco- vehicles. With everything taking place nomically,” emphasizes Dr. Lutz-Eike under the same roof, the lines of com- Elend, Head of Lightweight Design munication are shortened. Technology and Process Development. At first, the idea of using lightweight aluminum – which weighs about a Aluminum has long since ceased to third less than steel – on a large scale be the only interesting material for in automobile production was met by building auto bodies. Audi specialists most experts with skepticism. But are working with plastics, magnesium Timm worked persistently to over- alloys and steel alloys. The latest come all objections. For a creative trend in airframe design is using car- thinker like him, one thing was clear bon fiber composite (CFC) materials, from the start: Simply duplicating the in which carbon fibers of different existing steel structure in aluminum lengths and orientations are em- would not be a recipe for success – bedded in a mush of plastic and then after all, such a new construction baked in an oven. 20 percent of the would be substantially more expen- A380 Super-Airbus is made out of CFC sive. So other advantages had to be and up to 50 percent of the latest weighed – for instance, finding new Boeing 787 is made of this material. ways to reduce the number of parts Automakers don’t intend to take a required. “The bottom line is that back seat in this area: One option on 30 percent fewer parts means 30 per- the Audi R8 supercar is to have the cent less logistics and 30 percent sideblades made from this high-tech fewer joins. So we immediately took material. This and other bold ideas another look at our production from Technical Development experts processes and sought new ways to are creating new challenges for optimize our design geometry by se- Michael Ernst, Head of the Technical lecting the most suitable materials,” Center, and his team, whose job it is recalls Timm. AUDI AG has already to implement them at the Aluminum received numerous awards for this and Lightweight Design Center. pioneering achievement; most recently by winning the 2008 European Tricky problems invariably arise when Inventor of the Year Award for its different materials have to be meshed Space Frame technology. together. “We make every effort to combine even ‘incompatible’ mate- Today’s challenges resemble the rials,” says Ernst. “Basically, anything Olympic motto “faster, higher, fur- is doable. But in order to ultimately ther.” Translated into the language of shorten the cycle times, our lab re- materials experts, this means: sta- sults have to translate it into actual bler, stronger, lighter. New aluminum automobile production.”

23 Vorsprung Pioneering spirit

These days, each car is like a three- LIGHTWEIGHT PIONEERS dimensional puzzle. Even the smallest Audi engineers can always learn from part has to perform a specific function. Mother Nature. Find out here what this means: Audi engineers can use their large se- www.audi.com/ar2008/pioneeringspirit lection of industrial materials and applicable computer programs to were built of the first A8: This played virtually explore which material is best a key role in changing the brand im- suited for a given part – and whether age and represented a quantum leap these “building blocks” can be assem- in modernization. Today, as many as bled into a total product without driv- 110 units of the new A8 roll off the ing the production line workers or assembly line each day – in part be- robots crazy. This approach makes it cause the number of components has possible to determine the very best been reduced by 25 percent. This was combination of materials needed to made possible by using more complex ensure a stylish and profitable design cast parts to perform multiple func- very early on in development. tions – similar to the nodes in a bam- boo stick or a blade of straw. Today’s experts at the Aluminum and Lightweight Design Center benefit In keeping with what Timm calls “the from over a decade’s worth of experi- best of all material worlds,” the trend ence in lightweight design projects. in lightweight design also encom- Since the successful 1994 debut of passes “hybrid design,” or compound the Audi Space Frame on the A8, five solutions like those used on the R8. further models – including the R8 – It’s a “wild” mixture of materials: The have been developed and produced, body and roof are made of aluminum, and the silver-gray metal has been the front fenders and sill trims of successfully processed into different plastics, the rear frame of magnesium hollow extrusions, heated and cast in (which is even lighter than aluminum) molds, or rolled into sheets of various and the engine hood of composite thicknesses and sizes. materials. Today’s lightweight design of motor vehicles is innovative high- performance technology on a par with “Hybrid design simply developments in aviation and space means that we use travel. Though there are some analo- the best of all material gies, the two industries are far from worlds.” identical: Production volumes of even Heinrich Timm, Head of the Aluminum and the most successful aircraft don’t Lightweight Design Center, AUDI AG compare with large-scale or even smaller-scale production volumes of Engineers today are using all varia- automobiles. Being at the forefront of tions of these different components research and production is an espe- to develop an appropriate architec- cially powerful motivator for the ture. In the past several years, the employees of the Aluminum and Audi Group has taken great strides in Lightweight Design Center, and their its materials and production compe- enthusiasm is positively contagious. tencies, making it a technological Science journalist and book author Klaus leader and pacesetter in automotive Jopp writes for Financial Times Deutschland, lightweight design. 70 vehicles a day Welt and Wirtschaftswoche.

24 Photos: Oli Tennent/gallerystock, Christoph Mattes, nasa/actionpress, AUDI AG pean InventoroftheYearAward. cept –mostrecentlywiththeEuro- this lightweightconstructioncon- has beenrepeatedlyhonoredfor ized auto-bodydesign.Thecompany Space Frametechnologyrevolution- Aluminum insteadofsteel–Audi BENCHMARK

Progressiveness “Our design is like a fingerprint.” Why does a car need to be beautiful? Ambra Medda, Director of the “Design Miami/” fair, discusses this issue with Audi boss Rupert Stadler. Both have a passion for the extraordinary.

27 Vorsprung Progressiveness

Interview Dominik Wichmann Stadler: That’s certainly true. Nonetheless, design domi- Photos Joel Micah Miller nance has not suddenly become relevant in recent years. The Audi brand, for example, is celebrating its centennial r. Stadler, you often speak about how design is anniversary this year. The design of our cars was already one of the absolute core competencies of the playing a significant role in our marketing success way back MAudi brand. At the same time, we are hearing in the 1920s and 1930s. Though it primarily had to do with over and over again that the automobile industry is going the notion of “beauty,” the basic principle behind it, name- to have to reinvent itself in order to deal with current chal- ly wanting to have this beauty for oneself, is the same to- lenges. So is the characteristic Audi design therefore going day as it was then. to change? Rupert Stadler: There is no doubt that our society is going Would it be true to say that a new era is also always pre- through a difficult period. And the automobile industry, of ceded by a new perception of design? course, is also significantly impacted by these new chal- Medda: I believe so. Take the triumph of the Apple iPod, lenges. In times of turmoil, people are even more likely to for example. Any one of us could have gone to a store and look for orientation and reliability. Orientation is some- bought a similar MP3 player at a fraction of the cost. Even thing we as a company need to be able to give our cus- so, most of us will buy the more expensive Apple device. tomers. Therefore, the very best thing we can do is to And why? Because it looks different; because it has a de- ensure that our products fulfill the same high standards sign that is considered contemporary. It is a product that of quality in the future that have made them known and has come to symbolize the hip and modern face of the digi- sought after in the past. And, of course, that also includes tal revolution. And that’s why people just have to have it. the design of our vehicles. Their look and feel may change – but only in terms of evolutionary and careful improvements. We want to emphasize the authenticity of our mod- “What matters is that the product els through our own unmistakable messages, and are thus also has a past. This is always developing into a signature brand. You could say that each a good basis for a truly sophisticated and every one of our cars is as unique as a fingerprint. and creative design.” Ambra Medda: I completely agree with that approach. Of Ambra Medda, Director of Design Miami/ course, a paradigm shift of sorts is underway right now, and it would be very surprising not to see it reflected in the design area. Good designers react to their environment. Stadler: Anyone wanting to sell a premium product today But this doesn’t mean they immediately resort to hasty is going to have to be able to give his customers clever and action. fresh answers to the pressing issues of the time. In other words: Anyone who buys an Audi today will expect it to ful- Since when has product design played such a decisive role fill environmental standards; they will expect it to combine in sales success? the very best of today’s technology with comfort, safety Medda: It’s hard to pinpoint exactly when. However, one and driving pleasure. As far as I am concerned, any car that thing I know for sure is that there isn’t a company today ignores sustainability is not in line with the times. Anyone that can afford to sidestep the unique selling point design wanting to grab his customer’s attention is going to have has to offer. Of course, that has a lot to do with the grow- to keep thinking outside the box, be willing to take on ing importance of marketing. Anyone who wants to set something new, and put his own stamp on it. That’s the themselves apart from the competition is going to have to goal of a signature brand, which is what we’re aspiring to articulate this. At the latest, that’s when product design be at Audi. comes into play. Medda: There is no comparison between how much more selective customers are today than they were a few years ago. They have come to recognize good design and good quality. They are more familiar with standards so are also less prepared to forfeit them. Design today is no AMBRA MEDDA longer a neat gimmick; design is a core component of Ambra Medda, 28, grew up in England and Italy. In 2005, every product. Medda founded Design Miami/, now one of the world’s leading fairs for high-end design. In April 2008, Medda Stadler: We have a promise to keep to our customers: “Vor- published her first book entitled “Destination: Limited- sprung durch Technik.” That may sound easy, but it is also Edition Design,” an overview of the 60 most sought- important that this claim is underscored by each and every after design destinations in the world. detail of our cars. And that applies to both the visual and tactile appeal of our vehicles: In the premium segment,

28 Ambra Medda and Rupert Stadler find inspiration in the diversity of color and form at the New Museum of Contemporary Art in New York City. Vorsprung Progressiveness

INTERESTING DISCUSSION A video clip of the interview can be found at: www.audi.com/ar2008/progressiveness

you always have to keep one step ahead of the times – completely normal to find a product being manufactured those are the rules of the game. in countless variations – options a customer can choose for himself. Anyone who cannot – or will not – offer such op- What other key challenges do you see for Audi over the tions to his customers is going to fall quickly behind. next few years? The success of the A1, which you are Stadler: I welcome this development with open arms; it hoping to bring to market in the coming year? means customers will identify even more closely with their Stadler: In principle, I am focused on the success of the products of choice. For example, anyone buying an A8 can entire brand. But of course, introducing the A1 is an impor- choose almost any color for the leather interior. In our tant subject for us. I have supported and monitored the factories, 36,500 stitches are sewn according to the cus- creation, design and initial planning of this model from the tomer’s individual wish. This is a service that unites our very beginning. It will come as no surprise that I am truly brand’s claim to perfection with the individual needs of convinced it will be a success. our customers. It’s one of the ways a brand acquires substance. It means that as a signature brand we are able to conform to society’s new understanding of luxury. Cus- “It is important that our claim tomers aren’t just looking for craftsmanship and high- ‘Vorsprung durch Technik’ is under- quality products; they are looking for intangible assets scored by each and every detail like charisma and style – that unique something, in other of our cars. And that applies to words, which offers superb handcrafted quality and also both the visual and tactile appeal meets their wide-ranging needs. of our vehicles.” Medda: What are some of the most unusual design re- Rupert Stadler, Chairman of the Board of Management, AUDI AG quests you have had from your customers? Stadler: Unusual requests are certainly no rarity. One of

Will this newcomer’s design differ radically from other Audi models? After all, Stefan Sielaff, chief designer for the Audi brand, recently said that the vehicle form would DESIGN MIAMI/ TM be significantly influenced by environmental demands, In 2008, AUDI AG was for instance by a drag coefficient of less than 0.33. the exclusive automotive Stadler: Obviously, an extremely aerodynamic car is going partner and exhibitor to look different from a conventional one. As a result of at Design Miami/ for the the environmental debate, new technical factors are being third time. Inspired by introduced that will certainly influence our design and the fair’s theme “Beyond pose a challenge. But that is precisely what is so exciting Organic – Design in the State of Nature,” about our job: developing and finding solutions. And that’s the Audi brand interpreted modern design under the in- why we have designers, technicians and engineers. In the fluence of nature with its installation “Audi Coastline end, I know we will be happy with a result that not only Marina.” The main attraction: the Audi Q7 coastline. The meets environmental requirements, but exudes enough fair is considered a highlight on the design calendar and individuality to make it unmistakable. is held twice annually, in Basel and Miami.

Isn’t this need for individuality in fact the meta-theme of DESIGN AWARDS contemporary design? The Audi brand once again demonstrated its commitment Medda: You have to differentiate here between industrial to the world of culture in 2008. In cooperation with design colleges and ART COLOGNE, the sales regions presented design of a classic nature and the creation of individual the “Audi Art Award for New Talents” and the “Audi pieces and limited editions. As far as the latter is con- Design Award.” Audi France has been honoring up-and- cerned, since it has to do with a different and much more coming artists in the areas of contemporary art, industrial intensively handcrafted approach, then individuality and design, sports and music with the “Audi Talents Award” uniqueness naturally play a more important role than they annually since 2007. In the UK, the Audi brand founded do in traditional industrial design. But even products the “Audi Design Foundation” in 1997. The foundation geared towards the mass market are beginning to exhibit supports artists and young designers who make a positive difference in people’s everyday lives with their work. the same trend, which only goes to show how individuality AUDI AG sponsors the “Audi Mentor Prize by A&W,” which is playing an increasingly important role here as well. the well-known German home and design publication Stadler: Are you alluding to personalized design? “Architektur und Wohnen” has awarded to up-and-coming Medda: Yes. With customers becoming ever more aware of designers since 1997. design and improved technical possibilities, it has become

30 The New Museum of Contemporary Art in New York is considered to be one of the world’s leading addresses for contemporary art.

the strangest was an order we received years ago from an Stadler: I think this is a positive development. At Audi, A8 customer for Nogaro Blue Alcantara trim and a match- form traditionally follows function. Function is an obliga- ing dress of the same material, a request she made when tion for us. In this respect, we follow the tradition of mod- ordering the car. She then wore this dress when she came ernism wholeheartedly – we only come up with something to collect her car. As everybody knows, there is no account- interestingly new when there is a perfect interplay between ing for taste. So, for a surcharge, any customer can have his designers and engineers. car delivered according to his individual wishes and ideas. What feeds inspiration for designing new Audi models? Ms. Medda, as a design expert, do you view such develop- Stadler: The role our company’s history plays should not ments with a certain amount of esthetic skepticism? be underestimated. We continue to draw on a specific de- Medda: Of course, not everything people put together resign language from our past and develop it further and flects my own personal taste. But that’s not the point here. further. In this way we are able to build an esthetic bridge What is more important here is that design is becoming in- to the past and the tradition of our brand. creasingly anchored in society. No longer is it just some exotic hobby pursued by certain curators and older couples The Audi design language has also been an extremely who eat prawn cocktails at design exhibitions. The design German design from the very beginning. Why? debate is finally back on the agenda. Design has regained Stadler: Our culture is heavily influenced by technology. its relevance. Craftsmanship, precision and ingenuity mean something in Stadler: You have played a significant part in this with the Germany. At the same time, our cultural proximity to Design Miami/ fair. Mediterranean countries, especially Italy, is very obvious. Medda: Certainly not on my own. But the fair does provide Our longing for the country beyond the Alps has always a platform for anyone who is committed to a contemporary made its esthetic mark here. Today, we believe this mix – understanding of design and is passionate about it. Of course, this fusion of technology and beauty – is characteristic of that is above all the artists and designers themselves. Exhi- our vehicles. It reflects not only how much the product, but bitions are not only about sales; they are about providing a also the country, continent and its people have changed. platform for a substantive discussion on the subject. New- Medda: But what matters is that the product also has a comers are promoted; stars of the scene are honored. past. This is always a good basis for a truly sophisticated and creative design. An object shouldn’t necessarily look Are you finding that the trend is more about content and “designed,” it should just look good – timeless and without less about simple design language? frills. That’s what we mean when we talk about a modern Medda: Certainly content is playing an increasing role in classic. Such a title is the best design can hope to achieve. contemporary design, which is only natural given the in- Dr. Dominik Wichmann, journalist and book author, is the editor- creased emphasis on craftsmanship. Pure surface design in-chief of the multi-award winning Süddeutsche Zeitung magazine. is no longer enough. He is considered one of Germany’s most creative chief editors.

31 Photos: AUDI AG, Dean Kaufmann/New Museum Understanding Service in the taiga Whether a flat tire or damage caused by a collision with an animal: Audi’s world-class service is also at home in the heart of Russia – and superbly tailored to local customers’ needs. Audi mechanics’ workplace? Anywhere within 600 km of Novosibirsk.

Copy Julia Karulina winter roads buried under snow – even in the city. As soon Photos Frank Herfort as you leave Novosibirsk’s main thoroughfare, Red Prospect, ruts in the road can be 20 centimeters deep. And ovosibirsk, at the heart of Siberia: temperatures the number and size of the potholes increases with each far below freezing; “roads” often undeserving of passing kilometer. The long Siberian winter takes a heavy Nthat term. Drivers here have the very highest ex- toll. That’s why Russians love SUVs. Novosibirsk, a million- pectations of their vehicles. Take 35-year-old Sergei Sorin. strong city far east of the Ural River – 3,300 kilometers His vehicle of choice? An Audi Q7. “A good investment,” east of Moscow – is Russia’s geographic center. Here, in the says the head of two dental clinics. It’s the ideal vehicle for midst of the Siberian taiga (a swampy coniferous forest), a

32 Driving doctor: The Audi Q7 is a reliable service vehicle in the wide open spaces of the Russian taiga.

small outpost was founded 116 years ago for workers con- alone. Machine building, energy and metallurgy also play structing the Trans-Siberian Railroad. In 1893, the corner- pivotal roles in the local economy. The cockpit and tail of stone was laid for the new bridge across the mighty Ob the Superjet 100 passenger plane, which holds great prom- River. Novosibirsk, which means “New Siberian City,” is now ise for Russian aviation, are manufactured here. And home to more than 1.4 million residents and constitutes Akademgorodok, the internationally renowned research one of the country’s most important transportation hubs. center, has developed into an IT powerhouse. Thanks to the high-tech endeavors of young software developers, Novosi- Several major traffic arteries converge in Russia’s third- birsk is also known as “Silicon Taiga.” largest city. The Trans-Siberian Railroad and the Baikal Highway unite this massive country extending from Audi cars are coveted by prosperous Russians. Sales records St. Petersburg on the Baltic Sea to Vladivostok on the Pa- have been the norm for the brand in Novosibirsk for some cific Ocean. The Chukchi Highway branches off here into the years now. Around 25 percent more cars were sold in 2008 Mongolian steppes. On the Ob – which is one of Russia’s than in the previous year – almost 250 vehicles. And so the longest rivers and empties into the Arctic Ocean – ships brand is increasingly leaving its mark on the cityscape, with transport oil, construction materials and lumber. And Tol- some 2,000 Audi cars on the roads in Novosibirsk. The machevo International Airport serves all of Europe and mayor, high-ranking officials and the police also drive Audi. Asia. But this western Siberian city does not live from trade A key image booster.

33 Vorsprung Understanding

01 02

34 01 Into the wild: Anyone turning off the Peter M51 between Omsk and Novosobirsk Schwarzenbauer, has to master the muck and mire. Member of the Board of Manage- 02 Anna Bunyakina is an independent woman – ment for Marketing and drives an A3. and Sales, AUDI AG 03 Just call for roadside assistance: excellent service in the Novosibirsk region.

True understanding to me means … Half of the Audi models in Novosibirsk are pre-owned cars. Though most come from Germany, some are imported from Japan and so are right-hand drive, explains a service mechanic who ventures out into the vast expanses of the taiga every day in his Audi Q7 Service Mobile. The excellent quality seems to be whetting appetites. “Most people who drive a pre-owned Audi will frequently purchase a new Audi in the long term,” explains the young mechanic on the drive … not merely hanging on to the familiar, but to the outskirts of the city. He certainly has his hands full, also questioning and scrutinizing in order to especially during cold weather. Flat tires and dead batteries recognize potential and discover opportunities. are not uncommon in the winter. Today, it is Anna Bunyakina Every relationship requires getting to under- who needs the help of the Service Mobile: One of her tires stand the other person: their notions, goals and punctured while she was turning. As soon as the service wishes. How this holds the key to successful mechanic receives her call, he sets out to change the tire long-term relationships with our customers be- on the 29-year-old’s A3 in the autumn muck and mire in an came clear to me when selecting a top hotel on Audi Q7 equipped for every emergency. She bought her ve- my business trips. Though there did not seem to hicle a year ago in Novosibirsk. Single-minded as she is, she be much difference in the quality offered by the drove her new vehicle straight off the lot. “I couldn’t wait different hotels, I found myself regularly prefer- two months while a car was built to order and then shipped ring the same leading establishment. On one of from Germany,” she says. Bunyakina is the head of regional my trips, I spoke with the managing director and development for a large Russian restaurant and fast-food accompanied his team for an entire day. My chain. In other words, a career woman – still a rarity in epiphany: A good hotel becomes a leading hotel patriarchal Russia. This self-made woman began her varied by treating its guests properly. The hotel staff career as an assistant manager at a modeling agency. excels by understanding the individual situation Nowadays, she seeks out suitable sites for new restaurants. of the guest in question. They have a feel for just Next year, Anna Bunyakina is moving to Krasnoyarsk to the right level of service for their customers. And manage a franchise of the restaurant chain. Here, in an- guests are not simply satisfied; they keep com- other Siberian city located about 650 kilometers east of ing back. Novosibirsk, she will be able to rely on the same great standard of service she receives in her home city. We at Audi have every right to be very proud of our products. Our cutting-edge technology and Beyond city limits, vehicles are plagued not only by poorly outstanding design have propelled us to a lead- maintained roads, but also time and again by fuel that has ing position. By truly understanding our cus- either been diluted with water or falsely labeled. Often tomers, we will become the world’s most attrac- enough, customers unwittingly fill up with diesel instead tive premium brand within the next few years; of gasoline – and naturally don’t get very far. If they then by understanding what they expect from us as a break down in the middle of nowhere in the Altai Moun- premium brand and by understanding what per- tains, the service mechanic is usually greeted like a knight fect service means to them. My personal goal is in shining armor. Top-quality Audi service is every bit as to have the most satisfied customers. And just as standard in far-flung Siberia as it is on the streets of Berlin I am loyal to my favorite hotel, they will remain or New York City. Several times a year, therefore, the Audi loyal to the Audi brand, use our services – and Service Mobile ventures up to 600 kilometers into the recommend us to others. I am sure of it. taiga. And even in the 21st century, this means adventur- ous road trips through sparsely populated landscapes for the mechanics as well!

35 Photo: AUDI AG YELLOW The color of the sun conveys optimism and cheerfulness. But yellow also kindles negative associations like deceit, envy, anger, disease – especially when combined with black. The imperial color in Asia, it also carries positive connotations of wisdom and dignity. It’s the car color of choice for the bold owner of a small vehicle who wants to attract attention.

RED The only color that counts among the 100 most important words in nearly all of the world’s languages. Symbolizing energy and passion, it increases the heart rate and breathing. A universal warning signal. In China, it’s also the color of good luck. A popular car color in the 1990s before almost disappearing, it is making a comeback. Conveys athleticism and impulsiveness. Psychology The power of color Red stimulates. Blue soothes. Coffee served from a brown pot is perceived as strong. Colors have a greater influence on us than we think. Experts try to decipher their impact and predict color trends. Outside the ever-changing world of fashion, this is also crucial in automotive design, where car color can make or break a sale.

Copy Klaus von Seckendorff vision become popular during its strong, 84 percent felt the coffee early black-and-white phase. from the red pot was aromatic and f you ask 10 people what color And yet, Goethe’s observation rings powerful, while the coffee from the car they would never own, you true for the colorful world: “The eye blue pot was described as having a Iwill hear all kinds of answers; needs color as much as it needs light.” mild aroma. A similar pattern of re- from bright yellow to restrained This may explain the proclivity for sults was observed by a group of U.S. white. Their responses, however, do colorful houses in Scandinavian coun- psychologists, who had test subjects reveal one amazing fact: For most tries, where winters are long, dark lift boxes of equal weight but of dif- people, there is actually a color that and colorless. Colorful diversions ferent color. Most of the test subjects would seriously keep them from apparently keep us sane. were only able to correctly estimate buying a particular car. “More than “Colors shape our thoughts, feelings the actual weight (three pounds) of the 40 percent of drivers could see them- and actions,” says renowned color psy- white box. They estimated the yellow selves switching brands if their car chologist Harald Braem. “They have a box to be 3.5 pounds and the blue to company did not offer the right color,” measurable influence on heartbeat, be 4.7 pounds. The estimated weight says Karen Surcina, Color Marketing pulse and blood pressure. They can of the black box (5.8 pounds) was and Technology Manager at the U.S. soothe or provoke fear, cause sensa- almost two times that of the white. coatings giant DuPont. tions of hunger and thirst, hot or cold. It may be that common sense alone Colors are powerful. They cast a spell The perceived temperature in a room keeps us from coloring laundry pow- on everyone and shape first impres- painted light blue can be as much as der or lemon candies brown. But nor- sions. In his 1810 Theory of Colors, ten degrees lower than in one painted mally anyone wanting to market a Johann Wolfgang von Goethe mused: a warm orange.” product is well advised to study the “Only a few are immune to the charm Scientists have repeatedly demon- findings of color psychology. of colors, which are quite visibly strated the effects colors have on us. propagated throughout nature.” Col- At the University of Munich, several Several years ago, Apple launched a ors can whet the appetite or spoil it, hundred school and college students trend by using pure white. Chief de- put us in a buying mood, or sponta- participated in various intelligence signer Jonathan Ive adds: “We didn’t neously trigger feelings of like or dis- tests. Professor Markus Maier found intend any deeper meaning. Some like. We classify them as warm or that when people are under pressure people see our white products as rep- cold, and speak in terms of sweet pink to perform, a red coversheet alone resenting optimism for the future. or screaming red as though colors is enough to significantly lower their I don’t think they’re entirely wrong.” could be tasted or heard. scores compared to different-colored Right now, however, Apple computers Could people even exist without col- coversheets: “Red signifies failure are going more in the direction of alu- ors? Throughout human evolution, and thereby triggers avoidance anxi- minum finishes and iPods are becom- they have given quick guidance: Red ety, as brain wave measurements ing ever more colorful. Wherever or the combination of yellow and demonstrated.” there is a trend, there is generally a black signified danger from fire or In a market research test, 200 test countertrend. “Trendsetters naturally dangerous animals, while green drinkers were all served exactly the always want to be the first at some- symbolized fertility. The human eye same coffee poured from differently thing. As soon as a trend becomes is also highly sensitive to nuances colored pots. 73 percent felt the established, it no longer interests trend- between light and dark, helping tele- coffee from the brown pot was too setters,” says Audi color designer

37 BLACK Conservative, but always in fashion. Functional not flashy: That’s the message communicated by this classic color. Though the color radiates respectability and strength, it also symbolizes death and mourning. That is, with the exception of China, where black is associated with power and money. Black is the color of government vehicles. Dark cars appear more serious and distinguished than light-colored ones. WHITE White stands for technological progress, immaculate innocence and pure nature. In Asia, it is the color of sorrow and symbolizes the transition into a new state; rebirth. More popular as a car color in North America and Asia than it is in Europe, where it is on the rise. White cars come across as light and airy. White offers a wide range of hues and shades. GREEN Represents health and nature, but also symbolizes envy or in- experience. The evergreen Christmas tree symbolizes eternal life. A safe haven between energetic red and passive blue. A green light signals that everything is OK, that the right solution has been found. Not currently a widespread car color.

BLUE Used in uniforms, it communicates allegiance to the state and symbolizes loyalty, order and rationality. Considered to be a masculine color, it conveys distance, coldness, but also melancholy (blues). In southern countries, blue window shutters and doors are thought to attract good spirits. Blue (specifically dark blue) is the third most popular car color. Revitalized by metallic colors with turquoise hues. Psychology Vorsprung

COLORS MAKE CARS Painting a car is a complex process. What does it look like when an Audi is dressed up? Find out here: www.audi.com/ar2008/psychology

Sandra Hartmann. The more stylish a essential? Are warm tones good for so- taste, there are concrete criteria that product is, the more difficult it is to cially and economically “cold” periods? also play a role. Exotic paint jobs, walk the tightrope between going Movies, advertisement, packaging, for example, can negatively affect along with current trends and stand- fashion and architecture can also give resale value. A comprehensive study ing out from the crowd. impulse. “Using all this information, of used vehicle sales in Switzerland At first glance, car manufacturers we are able to draft what we call showed that prices can vary as much seem to have an easier time deciding ‘mood boards,’ which reflect the color as 20 percent depending on color. how to handle this challenge: Their world in which we want to live,” ex- Most of the time, therefore, the pow- products are durable, are developed plains Audi color expert Sandra Hart- er of color triumphs over mundane over many years and, therefore, can- mann. “Trends must be translated suitability for everyday use. This does not and should not reflect all fads. Yet into the Audi brand, the specific mod- not mean, however, that individual this makes it all the more important el and its formal idiom.” A business preference is not taken into consider- to anticipate customers’ basic prefer- sedan demands different coloring ation on questions of taste. A compari- ences for the next five years as accu- than a lifestyle car. “An Audi A8 in son between Asia and America shows rately as possible. Ute Grönheim from Solar Orange,” says Barbara Hondyk just how much influence different Audi Design sums up this dilemma: from Audi Product Marketing, “would cultures and mentalities can have. “The mind wants something new, probably not appeal to most tastes. Sandra Mathia, a designer in charge while the heart wants the familiar.” Conversely, this color is very well suit- of the U.S. market for BASF Coatings, Fortunately, customers’ color tastes ed to a sporty vehicle like the Audi S3.” observes a predilection for extremes: only change gradually. Over the last “In the United States, we see soft, 20 years, they’ve gone from red, blue At BASF Coatings, “key colors” are refined and organic surface effects and green – all colors experts believe first developed independently of at one end, and very coarse aluminum are on the verge of a revival – to silver, brand image and technical require- flakes that give the paint the appear- the worldwide market leader. Experts ments. Work is then carried out with ance of depth at the other.” Her col- also agree that the ever-popular black Audi designers to tweak the nuance league Chiharu Matsuhara on the other reflects the current penchant for lux- and effect of the colors. Afterwards, hand has found in Asia that “the urious purism and has good prospects an entire catalogue of specifications wealth of finishing effects is still lim- for the future – not least of all be- for each selected color is issued. Hans ited on China’s roads. Uniqueness is cause a lot of energy is being put into Carstensen, in charge of paint shop an important selling point in Japan, giving new nuances to widespread process technology and planning at where many car companies develop paint finishes. Designers are even Audi, checks the processing capability special colors for certain models. working on making pure black shine. of the paint lines aided by a team of Customers tend to seek small cars Ambiguity is in vogue right now. chemists, engineers and material sci- that match their other ‘accessories’: Nano-particles and tiny, thin metal ence experts. His complex tests also car, cell phone and handbag all in flakes are being used to give colors check for scratch resistance and re- cute pink, for instance.” the ability to change depending on sistance to damage from stones and However, anyone who cultivates their its exposure to light. chemicals – characteristics customers fondness to such a radical extent runs For paint designers, once new designs expect. One of the tests used to check the risk of quickly becoming bored with are exhibited at the International the ability to withstand all types of it. In the words of Goethe: The eye Motor Show (IAA) in Frankfurt, they climates is the grueling sunbath of a needs colors, not the dominance of a become “yesterday’s trend.” Eva Höfli, three-year “Florida weathering single color. Current trends seem to color designer at BASF Coatings, and process” in which key painted panels be catering to this need. International her counterparts outside the auto in- are exposed to the elements. studies conducted by coating pro- dustry are working to discover tomor- At the end of the long journey to se- ducer PPG have led their Color Styling row’s trend. When stately-white furni- ries production, the final inspection is Manager Jane Harrington-Durst to ture is presented at trade fairs or when made by the Audi Board of Manage- prophesize that “the future of the car the ambience of some lounges is set ment itself, which is presented with a is a colorful one.” by using red and brown tones, it gives fully painted vehicle. After years of important insight into social develop- preparation, the market will actually Dr. Klaus von Seckendorff works for ments. Is white a sign of searching for decide whether or not the color is a Süddeutsche Zeitung Wissen, Frankfurter new values, of concentrating on the success. In addition to questions of Rundschau and Die ZEIT, among others.

41 Originality Fit for an emperor Purchasing a vehicle is a truly important event in a Chinese customer’s life. Audi therefore relies on select dealers like Beijing DAD Automobile Sales (Deaoda) – an emporium with beauty oasis and shopping center. A visit to an unconventional dealership. Copy Michael Kirchberger Photos Katharina Hesse

oday is a red letter day in Cai Zhengdong’s life. Barely T 35 years old, in the Middle Kingdom – where age is equated with experience, wisdom, and prosperity – he is considered to be at a rather fool- ish time of life. Yet Cai belongs to the China of new values and new prosperity. He has already done well for himself: This design engineer heads a 20-person team at an electrical-appliance factory on Beijing’s outskirts. Even so, he is rather nervous when the doors of Beijing DAD Automobile Sales open and senior staff welcome him like roy- alty. Today, Cai is taking delivery of his new Audi TT. Meticulously polished, his sports car shines in this new glass building near Beijing’s 4th Ring Road. Deaoda is one of the largest Audi dealers in the world and one of 125 deal- erships in all of China. In 2008, Deaoda sold some 2,300 new vehicles – a year- on-year increase of nearly 10 percent. Shi Guiyuan, President of Deaoda, knows what customers expect from a luxury brand. No less than 28 sales- people go the extra mile in this prestigious complex to anticipate every conceivable wish a visitor might have. This dealership intertwines Audi’s typical functional elegance with Chinese

Customers collecting their new Audi. They often spend hours of excitement getting a feel for their automotive dream come true.

43 Vorsprung Originality

tions and high levels of particulate 01 matter substantially reduce service intervals: Air filters and engine oil, for example, must be changed relatively frequently. And because Deao- da’s catchment area extends more than 200 kilometers into the surrounding area, many customers who have made a longer journey choose to wait here while having their vehicles serviced. Reason enough for Shi Guiyuan and his managing director, Ji Hongbo, to realize an unconventional service idea. They set up a shopping center of sorts directly adjacent to the automotive showroom and garage. On the ground floor: an accessories supermarket selling everything from air fresheners through climate-friendly seat covers made of wood balls to 03 tea makers and good-luck dragons; everything a Chinese driver could wish for. Having satisfied their craving for automotive purchases, Audi owners customs. For example, tremendous automotive garage are spotless: There can choose to pamper themselves just flower arrangements adorn the ta- are no tools lying around; no over- one floor up. An escalator whisks them bles, creating an atmosphere that looked cleaning equipment. “Our cus- into a beauty oasis and entertainment facilitates good business for everyone tomers expect the utmost in quality area, including a hair salon and mas- involved. The color red – which sym- and reliability – not only with regard sage clinic as well as a shoe-repair bolizes good luck in China – pervades to their vehicles, but also our services,” shop, a leather boutique and a cloth- the dealership. In addition, demon- explains Shi Guiyuan. Even the two ing store. Visitors can also turn a few stration and showroom models are stations for welding aluminum vehicle fast laps on a model-car racetrack; not arranged by chance; instead, their bodies could serve as a setting for a billiard tables offer an opportunity placement represents an unwritten candlelight dinner. for relaxing concentration. This code of harmony necessary to pro- emporium also houses a cyber café. mote customer satisfaction and suc- Deaoda’s volume is considerable. Dur- Anyone still looking for a diversion cessful business. ing peak periods, the automotive service can seek out the in-house movie The salesroom is immaculate. The garage processes up to 400 vehicles a theater to enjoy the latest Hollywood new Audi customer Cai Zhengdong day. On a typical day, 200 vehicles are blockbusters. “We have plenty of himself is visibly impressed. Even the serviced for the everyday strains of parking spaces,” adds Shi Guiyuan 36 service points in the enormous China’s roads. Beijing’s climatic condi- with a laugh. “Some customers are

44 04

01 Even the service garage sparkles at Deaoda in Beijing. 02 This emporium offers much happy to stick around for quite some addresses of existing and potential more than just cars. time, be it to catch the end of a movie customers. 20,000 come regularly 03 Customers can also make use of the time to get their or to challenge someone to a rematch to have their vehicles serviced or sim- hair done. of billiards – long after their car has ply to while away the time. They 04 Air fresheners, seat covers, been serviced.” appreciate the inviting atmosphere, good-luck dragons: all available at the accessories If a customer doesn’t want to wait at the chance to find out about new supermarket. Deaoda, he is given a complimentary models and enjoy dreams of increas- mass-transit pass. A collect and return ing prosperity. service in roomy chauffeur-driven A6L For many customers, their first en- sedans is also available to customers. counter with their new Audi is a truly Deaoda is open from 7:30 a.m. to special experience. Until recently, 6:00 p.m., seven days a week. In an more than a few of them had been aspiring economic power such as China, getting around on just two wheels; for there is simply no time for days off. others, first automotive experiences Service personnel remind customers were spent in meagerly equipped of upcoming appointments by text compact cars. The “Audi experience” is message. Shi Guiyuan has 30,000 terra incognita for them. Therefore,

45 Vorsprung Originality

all new customers get a three-hour The TT and the A5 are especially popu- orientation session, concluding with a lar among Chinese women, points out test drive in their new vehicle. Even Ji Hongbo. She places great hope in the the technically well-versed Cai Zheng- new Audi Q5, which will soon be pro- dong remains intent as he takes in the duced in China as well. “The Audi Q7 flood of information. Yet sometimes is doing fantastically, yet is primarily questions remain unanswered. Ji driven by men. We have already Hongbo recalls a customer who – received a lot of enquiries about the six months after purchasing a new Audi Q5 – mostly from women.” Audi A8 – complained that the suspen- 02 sion was too sporty for him. “He left Shi Guiyuan relies on unusual tactics here a happy man after we showed to make sure that customers remem- 01 Bathed in light, the showroom models gleam in the him again how to use the MMI module ber him and his business. Soon after stylish Audi hangar. to switch the suspension from Sport his dealership opened in 2000, he 02 Customer service: No Audi mode to Automatic or Comfort.” decided that no vehicle would leave leaves Deaoda without bottles of mineral water It’s thanks to companies like Beijing the lot without 12 bottles of mineral bearing the Audi logo. DAD Automobile Sales and managers water in the trunk. The labels are em- like Shi Guiyuan and Ji Hongbo that blazoned with the logos of Audi and Audi has seen such rapid growth in of Beijing DAD Automobile Sales. More- the Far East. Ever since it went into over, he explains, a fourth story is partnership in 1988 with what is now soon to be added to the building. They known as China FAW Group Corpora- could certainly use the space, he says. tion in Changchun in the north of the But more importantly, he wants Deao- country, the brand has been very suc- da to be even more visible from the cessful in China, where more than ring road, where hundreds of thou- 100,000 Audi vehicles are now sold sands of vehicles pass by every day! EXPERIENCE AUDI each year. The A6L, the long-wheel- The Deaoda dealership opens up base version of the full-size sedan, a whole new world of experiences. accounts for 65 percent of sales at Michael Kirchberger is a freelance automo- Find out for yourself: Deaoda. Second place goes to the A4; tive journalist and works primarily for Frank- www.audi.com/ar2008/originality preferably with a powerful engine. furter Allgemeine Zeitung. //////// 3 x VORSPRUNG IN //////////////////////////////////////////////////////////////////////////////3min.

01 15 YEARS OF AUDI HUNGARIA 15 years of growth and consistent success: AUDI HUN- GARIA MOTOR Kft. in Gyo´´r, Hungary, celebrated a notable anniversary in spring 2008. By the end of 2008, over 16 million engines had been built at one of the world’s largest engine plants since production started there. Car manufacturing operations also reached an auspicious milestone: Over 400,000 vehicles have left the Gyo´´r assembly line since 1998. On a site extending

Anniversary: For over 10 years the company has been over more than 1.6 million square meters, the Hungar- manufacturing cars alongside engines in Hungary. ian plant currently turns out up to 7,000 engines and 300 cars per day. Alongside the Audi TT models, the A3 Cabriolet* is assembled here on behalf of AUDI AG.

02 PRODUCTION KICKS OFF IN INDIA Production for the Indian market has started in Au- rangabad, a city located in the state of Maharashtra, where the Audi A6 full-size sedan has been built since November 2007. An assembly line for a second successful model, the A4, went operational in the fall of 2008. With this move, AUDI AG is maintaining its growth Growth trend: The A4 and A6 models are built in Aurangabad. trend and investing in the future of one of the world’s most promising auto markets.

03 20 YEARS OF Breaking new ground: a new production AUDI CHINA hall in the making at Changchun, China. AUDI AG’s highly successful partnership with what is now known as China FAW Group Corporation (FAW), China’s oldest automotive business, goes back over 20 years. Timed to coincide with its anniversary, the cornerstone for a new production hall was laid at Changchun in June 2008. The extra capacity is being created in response to rising demand for the A6 L and A4 models. Production of an A4 L long- wheelbase version exclusively for the Chinese market began in late 2008, and as of 2010, the Audi Q5 will also be also be built there. Next to Germany, China is Audi’s largest sales market, with over 100,000 cars sold each year.

* Fuel consumption and emission figures at the end of the Annual Report. 47 Photos: AUDI AG When not on stage, Juan Diego Flórez (here at London’s Royal Opera House) is devoid of attitude. His breakout role: the cocky tyrant Corradino in Rossini’s “Matilde di Shabran.” Precision Scaling the heights The critics are raving, the audience is captivated: With incredible ease and precision, the young tenor Juan Diego Flórez climbs up the scale. The infa- mous high C is his specialty. A portrait of a vocal powerhouse.

Copy Teresa Pieschacón Raphael strokes his narrow chin with its fashionable goatee. “The Photos Michael Clement high notes really electrify people.” But he can only fathom a guess why. A tenor’s voice certainly sounds “different” – ondon, Covent Garden. The venerable facade of the for many even erotic. Flórez thinks it might also have Royal Opera House shines in the midday sun. The something to do with the tenor roles themselves. After L world-famous opera house is the setting for works all, who wouldn’t fall for a nobleman, a prince or even a of great pathos, where dramas of love, jealousy and be- hero? Flórez himself says that navigating the way through trayal are played out night after night. Spectacular theater his upper voice “is cathartic: It’s like entering another that tells the age-old story of life and death, and the dimension.” struggle between good and evil. But opera is pure illusion and backstage, there’s not quite the same kind of magic. Anyone who has ever heard this seemingly unpretentious Instead there’s a hive of activity, people going to and fro; tenor sing “Una furtiva lagrima” from Gaetano Donizetti’s a cardboard box full of scores here and over there, cos- opera “L’elisir d’amore” has gotten a peek into this other tumes hanging on a rack. Even the artists’ dressing rooms dimension. Flórez’s artistry flows out during this intro- look functional, a sink, a long mirror, a box of facial tis- spective romanza like a waterfall of emotions, cascading sues, two plastic chairs, a clothes rack and a piano. And down on his listeners – every note like one “furtive tear” this is exactly where we have arranged to meet the new that drops back to the last row of the parquet. But all stops star tenor Juan Diego Flórez for an interview. are pulled out on this operatic heaven-on-earth when Flórez offers up “Ah! Mes amis” – the well-known and noto- He’s already there. He reticently shakes my hand – there’s rious aria from Donizetti’s “La fille du régiment” with its none of the joviality that many of his colleagues are known many high Cs. Brilliant silver tones like those of a trumpet for. Another rehearsal this morning – three hours long – appear on the horizon, igniting an absolute fireworks dis- and in just a few days, Flórez will be back on stage as the play of color and embellishments. How effortlessly the cocky tyrant Corradino in Gioacchino Rossini’s opera tones seem to flow forth from a man that arts reviews have “Matilde di Shabran,” a role that made him famous come to call the tenor “the world has been waiting for.” overnight. “I’m probably the only one who sings this part,” says Flórez not without pride. It’s a fierce role with numer- Rossini, however, would have seen it differently. In 1837, ous coloratura and a high tessitura dreaded by many a when the composer heard the first high C emerge from the tenor. mouth of the tenor Gilbert Duprez, he was so horrified that No wonder the 36-year-old Peruvian is booked up until he compared the tone to “the shrieking of a castrated roos- 2015. “Yes, yes, the high C,” says Flórez with a smile as he ter whose throat is being cut.” As Flórez explains: “In the

49 Vorsprung Precision

01 The pressure forces him to be even better, says Flórez, getting ready for his performance back in the dressing room. 02 Backstage, the set is being built up – perfecting the evening’s illusion.

“Navigating the way through my upper voice is cathartic: It’s like entering another dimension.” Juan Diego Flórez

past, singers used their natural voices up to a certain shift into fourth or fifth gear. I use a special breathing register and then switched over to falsetto, or pure head technique to exert just the right pressure, just as if I were voice. The result was a very placid tone. Duprez was the stepping on the gas pedal. Air is the singer’s gasoline: You first tenor to sing the high C using his full voice, or from have to use more and more air to reach the high notes, the chest. In other words, naturally. That sounded very while the diaphragm compresses and the body contracts. aggressive back then.” Even so, Duprez started a veritable I have to keep the pressure on and find the right balance. revolution in singing technique, the likes of which have not This is the secret of high notes.” Flórez was trained in this been seen in any other voice category, and which led an- technique. First in Lima, where he grew up as the son of a other composer, Hector Berlioz, to rave, “The tenor is a folksinger, and then from 1993 at the renowned Curtis creature not of this world.” Institute of Music in Philadelphia. “Oh dear!” laughs Flórez. “You never know with Berlioz exactly how serious he was when he made that statement.” When the world’s most famous tenor, Enrico Caruso, was As for Flórez, he’s down-to-earth. “I try to sing without any once asked the secret of his extraordinary success, he hint of affectedness.” The South American likes to compare replied: “A big chest, a big mouth, 90 percent memory, his singing technique to driving a sports car: “The various 10 percent intelligence, a lot of hard work and a little registers I sing in are like the gearshift. When I start to something in the heart.” Flórez smiles. He would add intel- move towards a high note, then I will probably have to ligence and heart to the formula, though he will not and

50 Frank Dreves, Member of the Board of Manage- ment for Produc- tion, AUDI AG

BEHIND THE SCENES Juan Diego Flórez is a likeable opera star. Find out for yourself: www.audi.com/ar2008/precision

Precision cannot compete with Caruso’s enormous chest, which to me means … Caruso could allegedly expand so that he was able to push a grand piano several inches along the floor. He obviously doesn’t resemble the stocky, bull-necked prototype tenor of those days. This “tenore di grazia” with his elegant, flaw- less voice seems predestined for the operas of Rossini and Donizetti. He prefers to sing the roles in their original set- … more than just tight seams and small radii. tings; the smaller theaters for which operas were com- For me, it’s a motivating force that I passionately posed. That’s where he believes his voice can be heard at promote and demand every day – from myself its best: “You can keep the voice very focused and don’t and everyone else. It’s precision in large and have to push. But I also like singing regularly at the major small objects alike. It’s the idea that every single houses such as London’s Royal Opera or New York’s Metro- detail counts – always! politan Opera, which seats around 5,000 people.” Basically, the preparation is all the same. “That’s also like Precision is a fundamental value of the Audi driving a car: You can drive the same car through a city, on brand. It shapes the quality of our cars, their country roads and the highway or on a racetrack. It’s all precise handling and their inherent sportiness. great.” He only uses a microphone for open-air concerts, Precision is everything that customers experi- as do all singers. ence with their senses; what they can see, hear, feel and smell. By selecting premium materials Flórez’s breakthrough came in 1996 at the Rossini Festival and working them to exact specifications, we in Pesaro, Italy. The then 23-year-old had to fill in for a sick create that unique beauty that sets Audi apart. colleague in “Matilde di Shabran.” With only a few days to learn and rehearse the role, he was celebrated as a spec- Precision leaves no room for compromise. That’s tacular new discovery. He’s had the audience captivated why we also pursue the same quality behind the and critics raving ever since. Though praised for his elegant scenes – in our tool-making shop, in engine pro- dramatics, his brilliant high notes and perfect phrasing, duction, body construction and in vehicle assem- people’s expectations are always growing. “I do feel the bly. Precision is an Audi principle that applies pressure,” admits Flórez. “But it also forces me to be even from the very first design step all the way to the better. Each performance is like a test.” final check of the finished vehicle. Production Of course, he has to watch out for his health, but he isn’t at Audi actively contributes to precision in all one of those singers who panic at the first sign of a draft. phases of product creation. Stages, however, are very dry and full of dust. Ever the con- summate professional, during performance he drinks I’m never satisfied with past achievements. For “green tea, tea and more tea.” Regular vocal exercises, of- me, each individual production step and every ten without that difficult high C, keep his vocal apparatus component on the car demands an even greater flexible and disciplined: “I still continue to record myself, level of precision. I never stop working on some- for study purposes,” says Flórez. thing until everything fits together precisely. Even so, he sometimes feels like he is standing at the brink I see the same passion, the same sparkle in the of an abyss: “There are passages in “Matilde di Shabran” eyes of our employees. In line with our continu- that are rich in coloratura and very high notes. It’s like driv- ous improvement process, they continue to ques- ing at 240 km/h. Everything must be very fast, very accu- tion the status quo in order to make things even rate. You have to be 100 percent in the moment: You can’t better. This is our very special strength – it’s afford to be distracted for even one second.” what Audi is all about.

The opera journalist Teresa Pieschacón Raphael has been following Flórez’s career ever since she first heard him sing live many years ago.

51 Photos: Gideon Marshall, AUDI AG Praise for the chief mechanic: DTM driver Timo Scheider (left) celebrates the victory with Sebastian Wilfert. With the exception of two short pit stops, Wilfert was relegated to being a spectator during the race.

Winning mentality “Timo wanted this title.” Audi successfully defended the DTM title in the 2008 season. Winning driver: Timo Scheider. One of his closest associates, chief mechanic Sebastian Wilfert, provides insight into the microcosm surrounding the racing driver during the season. TOP OF THE PILE A portrait of Timo Scheider. The likeable DTM champion talks about his recipe for success: www.audi.com/ar2008/winningmentality

hat a year: tension, work, 11 races, events on the monitors. There are moments of pure joy – wins, defeats, then the title – and a very such as during the final race at Hockenheim, when Timo Wspecial one at that. It was the first time Timo pulled away from his greatest rival at the start. But the Scheider won the German Touring Car Masters (DTM) and DTM is a rollercoaster of emotions: In Mugello, Italy, we the first time I was directly involved in such a victory. I had to stand by helplessly as Timo false-started, received have been working for Audi Motorsport in the DTM for four a drive-through penalty and fell far behind. years now, the last two years on Timo’s car. But 2008 was Situations like these prove one thing above all: that racing my first season as his chief mechanic. If asked to character- drivers are people and not robots. And each of us gives ize Timo, there are a number of traits that would spring to 110 percent to achieve everything for our driver and the mind: friendly, funny, active in the community, honest, Audi brand. focused, ambitious and fair – both to us and to his opponents on the track. He never thinks of me and my colleagues “Timo entered purposefully – and that as just the mechanics working for him, but cultivates a truly was exactly how he drove the race.” friendly relationship with us. And he takes it farther than Sebastian Wilfert, chief mechanic for Audi driver Timo Scheider anyone else: One race weekend, he surprised us with a game console; another time he gave each of us a mountain bike as a token of his gratitude. The final DTM race was a powerful demonstration of how strong we can be. After qualifying, we realized that Timo’s This go-to attitude has had a direct influence on our inter- car was seriously damaged. He had gone all out, but ran off personal relationships. In principle, Audi mechanics have line on one of the corners and his car bounced over the to perform the identical program to prepare each Audi A4 curb. When the car landed, there was quite a bit of damage, DTM for the race. The differences lie primarily in the indi- which meant we had to change the engine on the night vidual setup requested by each driver. So on race week- before the race. Almost the worst situation imaginable. ends, we use Friday, Saturday and Sunday morning to test But the other Audi drivers’ mechanics were happy to help the car. But well before that, Timo Scheider, his engineer and worked hard with us late into the night. The repairs Armin Plietsch and the entire Audi team give a great deal were finished at around four in the morning. Everything of thought to the optimal setup of the A4 DTM, making was fine; the work paid off. The Audi A4 DTM was perfect our work more transparent and easier. There is a clear during warm-up the next morning – just as it was during focus on efficiency. the race. There is a palpable and perceptible crescendo of emotions as the race weekend progresses into Sunday. When Timo Timo was completely focused on victory and winning the climbs into the car on Sunday afternoon, we spring into title. Neither hectic, nor anxious, his will to succeed was action again. As I close the door behind him, all the hype palpable, which had a calming effect on the team. His ar- and stress surrounding the television cameras, photo cam- rival in the pits testified to his expectations: He entered eras and guests comes to an abrupt halt. After everyone purposefully, was single-minded and didn’t have to say has left the starting grid, only a single mechanic remains much. Everyone understood what was at stake. And that standing at each vehicle with a starting battery to ignite was exactly how he drove that decisive race. the car. That’s what I do for Timo. It is the last chance we The first cause for celebration was in April when he fin- have to look each other in the eye. The next time will be in ished first in Oschersleben, Germany. Timo’s second win parc fermé, the enclosed area of the racetrack where the was at Brands Hatch, Great Britain. And it all came down cars are parked following the race. We had plenty of op- to the final race of the season at Hockenheim, Germany. portunities to offer our congratulations this season. Timo and his rival for the title were almost level on points. After the tremendous start, it remained extremely close The tension mounts on the way from the starting grid back at the front. That meant that our pit stops, again, had to the pit area. It’s a strange situation for those of us on to be perfect. The pressure seemed to make us stronger. the team: First of all, there is nothing more we can do to We completed each stop in slightly more than three sec- help Timo until he pits. Other than the two pit stops that onds, thereby helping Timo Scheider cross the finish line last just a few seconds, we are relegated to being nothing in first place. more than spectators. Of course, we can’t enjoy the race

the same way the fans in the stands do. I cheer Timo on, Reported by motorsports journalist Mark Schneider, who has long listen to his comments on the radio and eagerly follow accompanied the DTM both in front of and behind the scenes.

53 Photos: AUDI AG //////// 3 x VORSPRUNG IN //////////////////////////////////////////////////////////////////////////////3min.

01 AWARD-WINNING More than 90 awards worldwide paved the Audi brand’s road to success in 2008. The year kicked off with the reader poll staged by the trade magazine auto motor und sport, which saw four Audi models – Audi A3, A4, A6 and R8 – finish top of their respective categories (issue 4/2008). In the Chinese edition, the Audi A6L and Audi Q7 were also voted “Best Cars” in addition to the R8 (issue 2/2008). The Audi A4, A6 and R8 were all winners of the 2008 Auto Trophy awarded by Auto Zeitung (issue 25/2008). The Audi A4 was also voted “Auto 1 of Europe” by the readers of Auto Bild (issue 10/2008). The Audi Q5 received the Golden Steering Wheel (Bild am Audi boss Rupert Stadler receives the coveted Sonntag, issue 45/2008) in December, having already picked up the Golden Steering Wheel for the Audi Q5. “Euro Car Body Award” for its innovative body (October 23, 2008). AUDI AG also won the coveted “Yellow Angel” from ADAC’s “AutoMarxX” image and brand study (ADACmotorwelt, 2/2008) and the J.D. Power Asia Pacific 2008 China Sales Satisfaction Index (SSI) Study SM (August 28, 2008).

02 NEW PRODUCTS The Audi model family grew significantly in 2008: New additions were the TT TDI, TTS Coupé and Roadster, A3 Cabriolet, S3 Sportback, Audi Q5 and Audi Q7 V12 TDI. Successor models to the Audi A4 Avant, the sporty S versions of the A4 and the One of many new models in 2008: Audi RS 6 were also presented. The A3 and A6 core model series the Audi A4 Avant*. with their numerous sporty derivatives also underwent extensive model update measures.*

03 AUDI CONCEPT CARS 2008 In 2008, the Audi brand again produced some fascinating and visionary autos, starting with the Audi R8 TDI Le Mans, a high-performance road machine. Next, the elegant and powerful Audi Q7 V12 TDI coastline made its debut in Geneva. In May 2008, the A3 TDI clubsport quattro made a confident showing at the 27th Wörther- see Tour. In exhibiting the Audi A4 TDI concept e and the A1 Sportback concept show car at the Paris Motor Show, AUDI AG demonstrated a new approach to efficiency, dynamism and driving pleasure.

Smallest Audi: The A1 Sportback concept show car was unveiled at the Paris Motor Show.

54 * Fuel consumption and emission figures at the end of the Annual Report. Photos: AUDI AG Charisma Global cities Montreal, Sydney and Cape Town confidently set trends and cultivate their unique characters. Short stories by young literati have captured what it is that makes these cities tick, while a photo gallery of Audi’s latest models accompanies readers on their journey through these metropolises – this is no ordinary declaration of love.

Montreal 01 The sensuous Sydney 02 The mysterious Cape Town03 The multifaceted

“All three stories are like road movies.” Sorin Morar, 36, photographer, traveled around the world to capture the personalities of the TTS, A3 Cabriolet* and A4 as they unfold within the urban context of three world metropolises. “At times the car is in the foreground; at others in the background. And sometimes it disappears altogether – a fascinating play of images.”

55 Illustration: Matthew Cook Vorsprung Charisma

The colorful shop windows of Mile End reflect tree branches, most of whose autumn leaves have already fallen.

01 Montreal, the sensuous Mile End is a creative melting pot. Moving amidst art and design, the TTS is at home in the streets of this quarter. The multicultural flair north of Mont Royal, Montreal’s landmark mountain, opens the eyes to something new. 57 “The air smells of dried leaves. Up and down the street, there’s life and movement, like when I was a child.”

The plentiful fall harvest brings the colors of an Indian summer into the city’s market halls.

58 Charisma Vorsprung

Clockwise The city wind twirls the autumn leaves through the streets of Montreal. The traditional eatery Wilensky is famous for its sandwiches. The smell of foreign spices; the sound of foreign languages. Mile End has many faces. Vorsprung Charisma

Nature isn’t the only one who likes to play with color. Life in Mile End, Montreal’s artist district, is colorful. The autumn sun’s rays break through the canopy of the trees.

“I imagine the city in superb detail and when I open my eyes I want the city to look back at me, to meet me halfway.”

61 Vorsprung Charisma

Moving along steel and glass facades, a fleeting glance into the depths is greeted by empty streets, by shadows and light; by elegance.

* Fuel consumption and emission figures at the end of the Annual Report. 02 Sydney, the mysterious As darkness sets in, night enfolds the Australian metropolis in a veil of mystery. The search for a vanished beauty begins, hastened by a sporty and elegant companion – the Audi A3 Cabriolet*.

63 Vorsprung Charisma

Clockwise Shadows fill the streets of Sydney at night, penetrated only by the light of street lamps. Hidden well below the city’s powerful foundations, underground tunnels and passageways lead to places long since forgotten. Office lights transform the facades of city skyscrapers into works of art – or are they secret messages being sent in Morse code?

64 “I don’t think she wanted me to find her, she just wanted me to remember what we’d both forgotten.”

The movements are only fleeting shadows. “She was always trying to find out what the city was hiding. She wasn’t happy with its dazzling beauty. But beneath the surface there was only another surface.”

The night-time tangle of roads, bridges and underpasses is deserted – almost. Charisma Vorsprung

Sydney doesn’t come alive again until nightfall – inviting another encounter.

67 Vorsprung Charisma

03 Cape Town, the multifaceted Anyone willing to tear themselves away from the city’s picture postcard perfection will discover the raw side of the South African metropolis. A city buffeted by history. A city that also invites the Audi A4 to leave the beaten tourist paths. Old cargo ships are overhauled in the dry docks of the port. The A4 rests without a sound in the shadows of the rusty giants.

69 Within sniffing distance of two oceans, a colony of black-footed penguins: The A4 nestles within the city walls. Charisma Vorsprung

“All mixed up, of course, with the raucous gulls, blown in from the bay like sailors on shore leave.”

Clockwise If the trip should take you along a luscious, grassy hillside, you might catch a glimpse of the grazing quaggas, early relatives of the zebra. A tour through Cape Town is rich with new images, fragrances and sounds at every turn. Some impressions, however, remain unforgettable. Porcelain-blue heavens meet the dunes of the expansive beaches framing the sea.

71 Vorsprung Charisma

Goodbye paradise: Cape Town, where the Atlantic meets the Pacific, is considered one of the most beautiful cities in the world.

72 Local Authenticity Stories “Today, everyone’s so exalted” Clint Eastwood is a Hollywood legend. Movies like Unforgiven and Dirty Harry estab- What defines a me- lished his tough-guy reputation. At a ripe old age, when many people’s minds are tropolis? Three young on retirement, this multitalented artist has reinvented himself. As a director, he has writers use suspenseful, tackled hot social issues and taken a clear stand. A true original. melancholic and whim- sical short stories to describe their home- towns for the Audi 2008 Annual Report. A separate booklet for your Copy Holger Christmann enjoyment. ways been suspicious of those types. When his colleagues express their surprise that he seems to be completely un- ow do you remain successful over a 40-year career? aware of his stardom, he counters: “Everyone wants to be a By staying true to yourself and continuing to star these days. But that’s not enough. They don’t just Hstretch. Clint Eastwood has done both. He was the want to be a model – they have to be a supermodel. Today, star of Spaghetti Westerns before he became Dirty Harry – everyone’s so exalted.” “a role I really enjoyed.” Later on, as a director, he began Eastwood combats this with a sense of reality and modesty to develop characters a gunslinger and cop wouldn’t have that has only served to enhance his reputation among col- been interested in: the victims of violence. “I’m not that leagues. Actors rave about working with him, using old- good at introspection, but I do think that the secret is to fashioned terms like decency and integrity. One actor in continue to be interested in new things and to keep moving Mystic River said: “Eastwood is the only American icon forward. I’ve always worked and always continued to learn who’s not a disappointment.” There are a lot of managers something new,” he muses while looking out the window of who could take a lesson from his management style and the Mission Ranch restaurant, a historic farmhouse in efficiency. On the set, Eastwood doesn’t yell “Action!” In- Carmel, California that he bought and renovated some stead, he describes precisely what it is he wants to show. 20 years ago. He’s 78 now, but still looks as good as he did “Start when you’re ready,” he’ll add casually. That takes the in his earlier films; though maybe with a few more wrin- pressure off, giving the actors room to flourish. Typically, kles; leathery skin and graying hair. everything comes together on the first take: Eastwood Eastwood lives and entertains in Carmel situated on Mon- rarely needs to shoot more than three takes of a single terey Bay, which was once home to Ernest Hemingway and scene. “If an actor knows that it’s only going to start count- John Steinbeck. In the 1980s, he served as the town’s may- ing after the 19th take, then he doesn’t really need to make or for three years: “I got mad at the authorities a couple of an effort,” says Eastwood. This means the director has to be times, and then someone asked me why I didn’t run as a extremely well prepared. There is a positive byproduct: sig- candidate myself. But it wasn’t a long-term stint.” Today, nificant cost-savings. While production budgets of 100 mil- there’s only one thing he’s looking for in Carmel: peace and lion U.S. dollars are the norm in Hollywood, Eastwood usu- quiet. He lives with his second wife Dina, a TV journalist ally gets by on less than 30 million. 35 years his junior, in a house with a panoramic view over the coast. He calls it his sanctuary; a scenic place where he Outside, the Pacific breaks onto the sandy white beach. can kick back and enjoy taking a ride along the famous Could Eastwood’s unassuming style possibly be the prod- coastal highway in his Audi Q7 or A8. His wife drives a TT. uct of his upbringing? Born in 1930 in San Francisco during Though Eastwood likes cars, his passion is golf. He plays the midst of the Great Depression, he grew up in humble like a pro and his 11-point handicap puts him up there surroundings. After high school, he worked as a wood cut- among the top ranks of the Hollywood elite. Every year, he ter and gas station attendant before joining the army in invites colleagues and other celebrities for a showdown at 1951 and becoming a swimming instructor. While in the the AT&T Pebble Beach National Pro-Am. He’s done every- army, he met an actor who advised him to take his good thing but make a movie about golfing. “A few directors looks and athletic build to Hollywood. have tried – including me – but it just doesn’t give you an Eastwood smiles when he thinks back to his audition at an angle to develop any conflict,” he says. “Golf isn’t suited to acting school in Los Angeles. “There were 40 girls, most of high drama.” them attractive, and seven guys. I said to myself: ‘I don’t Eastwood is a complete stranger to artifice. He seems to care what it costs. This is the place for me.’” He reflects for find his strength from within, not from boasting. “There a moment and smiles. “Everyone needs some kind of moti- are some people who exude an exaggerated, almost arro- vation.” He got a few small roles, including that of a jet gant self-confidence,” he says, sipping his wine. He’s al- pilot in Tarantula (1955) – the oxygen mask covered his

74 TOUGH, BUT FAIR Whether as an actor or director, justice is Eastwood’s main theme. Vorsprung Authenticity

Dr. Werner Widuckel, / Member of the Board of Management for / Human Resources, AUDI AG face – until a studio boss decided that Eastwood’s Adam’s apple was too large, which put a temporary stop to his career. He eventually landed a role in the TV western Rawhide and attracted the attention of Sergio Leone, who hired him for his Italian western. Together they became world-famous. From the start, Eastwood realized that less is sometimes more. “There was a scene where a woman asks my character why he rescued her. The script called for an endless answer. The guy talked about his mother and took all kinds of Being authentic digressions, not really winding up anywhere at all. The to me is … more the character talked, the less interesting he became. I was able to convince Leone that only second-rate movies used dialog to express everything, and I rewrote the scene. Now the answer is: I hate injustice.” “I’m more talkative in real life, though,” Eastwood adds, smiling again.

Limiting himself to just a few terse sentences together with his unshakable coolness has become his trademark. … the epitome of distinctiveness. Being authen- One of his fellows expressed it this way: “Eastwood only tic means being credible, saying what one thinks has two facial expressions: one with the hat and one with- and doing what one says. This has a particular out it.” Do those movies seem silly to him today? He thinks meaning here at Audi. Working to take the lead about it a moment, his eyes narrowing into small slits as and staying ahead means leaving behind famil- they did in A Fistful of Dollars. “No. Anyway, you shouldn’t iar, well-worn paths and thriving on the resolve regret anything. I actually had a lot of fun doing it,” he to distinguish oneself from others by being “bet- says. Some lines still appeal to him, including the one ter.” Anyone who wants to take the lead and stay cynical police inspector Harry Callahan (Dirty Harry) used there must repeatedly answer the questions: to provoke the bad guys: “Go ahead. Make my day.” Even “What do we stand for? What distinguishes us then, it was important to Eastwood to question the bound- from the rest – today and tomorrow?” aries between good and evil and shake up conventional wisdom – which is precisely what he has been doing over the Being authentic means standing up for your con- past years in his critically acclaimed work as a director. victions with courage, passion and competence. The only difference is that he was fighting crooks back then. It is about setting trends, not following fash- Today, as a director, he shows the victims some sympathy. ions. These qualities shape our corporate culture, Mystic River tells the story of three boyhood friends whose our brand development and the way our cus- lives were shattered by a crime, ultimately ending with a tomers perceive us. This is most readily visible in revenge murder. In Million Dollar Baby, which won four our products. Oscars, a female boxer is brutally attacked in the ring, breaking her spine and crippling her. The movie tells her Anyone who wants to be authentic has to live an harrowing story of suffering that ends in euthanasia. Flags outward life that resonates from his inner being. of Our Fathers and Letters from Iwo Jima both portray a Courage, passion and competence can only be famous battle in World War II but from two different view- lived out in an organization that is defined by its points – dispelling any conviction that the United States appreciation of commitment and performance, was the hero. respect and open debate, and which is focused It is now late in the evening and Eastwood says goodbye. on collective goals. Promoting the development After 78 years, he has finally found a positive hero. He’s of employees to improve performance and shar- going to make a movie on the life of Nelson Mandela, and ing successes with employees rather than claim- is flying down to South Africa in spring 2009 to begin film- ing them as one’s own are therefore essential ing. But it wouldn’t be like Clint Eastwood to make a big traits of a management culture seeking to live to-do about it. “There are good stories and good scripts the leadership role credibly. Only when a com- that interest you,” he says with his typical understatement. pany provides the space for people to deal and “When one grabs you, then you make it.” behave authentically, will it be truly authentic.

Holger Christmann was developer and project manager of Park Avenue lifestyle magazine. Today, he works as a freelance author.

76 Photos: Neil Wilder/Corbis Outline, AUDI AG Wilder/Corbis Photos: Neil //////// 4 x VORSPRUNG IN //////////////////////////////////////////////////////////////////////////////4min.

01 02 03 AWARD-WINNING SALZBURG AUDI TWIN CUP AUDI R8 FESTIVAL IN ISTANBUL Doubly successful: The Audi R8 The Salzburg Festival draws the A final in 25 languages: 60 came away from the 2008 World attention of theater and music teams from 36 countries trav- Car of the Year Awards (March 20, lovers to the city of Mozart’s eled to Istanbul in June 2008 2008) with the dual titles of birth for five weeks each sum- for the world final of the Audi World Performance Car and World mer. In 2008, AUDI AG was once Twin Cup. After having already Car Design of the Year. The inter- again principal sponsor of this qualified during national heats, national jury based its choice on exceptional music festival and, the best service technicians and the outstanding handling charac- to mark the festival’s opening, advisors from the Audi dealers teristics that keep the R8 re- the company extended its third were pitted against each other sponding safely and precisely invitation to Audi Night during on the local Formula 1 race- even when pushed to the limit. which leading figures from the track. The winning team came The Audi R8 also demonstrated worlds of business and culture from Liaoning Aotong Automo- its dynamic qualities on the big got a chance to rub shoulders bile Sales & Service Co. Ltd, screen last year in the movie Iron with celebrities. A real highlight located in Shenyang, China. Man, starring Robert Downey Jr., of the opening weekend. Over 9,000 service technicians where it accompanied the super- and advisors worldwide took hero on his spectacular exploits. part in the Audi Twin Cup.

04 AUDI MEDCUP SETS SAIL FOR FIRST TIME 21 yachts set sail in the popular Mediterra- nean regatta series that was rebranded the Audi MedCup in 2008 to reflect the company’s new role as principal sponsor. The six regattas saw entrants from 10 countries involved in an exciting tussle for the title. Honors finally went to the U.S. team Quantum Racing, which won the most of the 53 races at venues including Alicante (Spain), Marseille (France) and Portimao (Portugal), where the final race was held.

77 Photos: AUDI AG There is no final frontier: In winter, extreme athlete Bubendorfer looks for new challenges on frozen waterfalls. Extreme experience Beyond the limits They free climb ice walls, dive to death-defying depths without oxygen and run themselves to exhaustion. Extreme athletes are driven by more than just the kick. They are looking for answers to life’s questions.

Copy Tobias Moorstedt energy efficiency? And can they be ogy but on his own ability, his own pushed just a bit further? But men strength and his larger-than-life deter- he line separating the mun- such as Trubridge, Thomas Bubendor- mination to make it to that next meter, dane from adventure lies only fer, the free solo climber who has next success or next record. “An oxygen T a few meters from shore. The completed more than 80 solo climbs tank, lamp and weights would make sandy floor of the lagoon breaks away in the Alps, Andes and Himalayas, or me feel like a human submarine.” as it becomes a bottomless abyss: Dean Karnazes, who ran marathons in The clear, light blue water gives way four different deserts in 2008, are Thomas Bubendorfer also doesn’t to a dark blue color that looks almost driven by more than an adrenaline think much of high-tech mountaineer- black. Most people are scared of rush. The adventurers climb the ing, where bolts and fixed ropes are Dean’s Blue Hole, a 200-meter deep highest mountains and plunge to used to hammer a highway into the hole in the ocean floor off Long Is- the deepest depths in order to learn mountain so that “any layman can land, Bahamas, because they don’t something about the world, mankind make the ascent.” The 46-year-old know how this surface anomaly was and life itself. Austrian acknowledges the human formed, what lives down there and The natural habitat of extreme ath- tendency in modern mountaineering what is going on. letes is inhospitable territory: deserts, to use mechanical aids to guarantee William Trubridge, however, sees a mountain peaks, ocean depths. Places safety and success. “You can’t stay realm of possibilities in the under- that are either hot or cold, where down below and arrive at the summit water hole. He can focus on his mis- strong winds blow and oxygen is in at the same time,” he says. And that sion in the Blue Hole: to go as deep as short supply. The Caribbean’s Long Is- possible and then return to the sur- land is just one such place and resem- face. The 28-year-old is the world bles nothing of the stereotypical tropi- The free solo climber Thomas Bubendorfer record holder in free diving and dives cal paradise. William Trubridge steers has completed more than 80 solo climbs in the Alps, Andes and Himalayas. without an oxygen tank, fins or other his truck along the dusty trail. Green- aids to a depth of 86 meters. “The ish-brown hills overgrown with tat- water is warm and still here, even at tered vegetation regularly ravaged by depth,” says the New Zealander, who hurricanes roll past the window. The used to train in the open ocean. beach is white and deserted, and only the flotsam gives evidence that a con- William Trubridge is a member of a sumer society exists somewhere be- small, global community of extreme yond the horizon. athletes whose careers and training Climbing, diving and running are sports schedules resemble a scientific ex- that conform to the way man moves periment. The research questions are: naturally. So Trubridge carries all of his What are the limits of human per- equipment in one hand: fins, contact formance? What is the maximum lenses, a nose clip and a diving watch. blood volume, muscle contraction, He depends not on the latest technol-

79 Vorsprung Extreme experience

applies equally to the route up a wall, pose yourself to homeopathic doses to life in the office, or to the stormy of danger and risk. “I am at my best heights of executive suites. “There is when things are really dangerous: no greater risk than not taking any I am alert and cautious and can do risks,” says the climber in summariz- things I normally couldn’t,” he says. ing his philosophy. He believes that if In business, innovative ideas and new you want to evolve, you have to ex- strategies aren’t developed in the comfortable routine of day-to-day business, but rather in heated meetings with investors and customers; “And then time stands still.” William Trubridge dives without an oxygen tank in moments when your own job or into the Blue Hole, a deep, dark hole in even the future of the company are at the ocean floor off the Bahamas. stake. “Pressure,” says Bubendorfer, “makes us stronger.” Which is why you have to proactively seek out such challenges. In winter, Bubendorfer wanders through dark alpine valleys in search of frozen waterfalls that form anew each year only to dis- appear into melt water in the spring. “There are a lot of conquests to be made there,” he says. The gentle words and lucid thoughts of these extreme athletes almost obscure the fact that their sports are unforgiving of mistakes. In 1988, Thomas Bubendorfer fell 20 meters, broke several vertebrae and still has a stiff ankle. Trubridge lost conscious- ness at a depth of 12 meters during an attempt to set a record in Egypt and was rescued by his safety divers. Dean Karnazes collapsed during a marathon in Death Valley. Though the extreme athletes discuss their near- death experiences almost casually, the stories always have the same ending: “The fall shattered my bones, but healed my head,” says Bubendor- fer. “We learn more from our failures than we do from our successes.” And that applies to everyday and business life as well. In addition to their athletic careers, Bubendorfer and Karnazes both work as management trainers, where they share the insights and routines gleaned from extreme situations with managers and business consultants. One of their most important lessons: “Success is dangerous – it makes you satisfied, contented and slow. A company that produces a successful product cannot rest on current figures – it has to continue investing in the future.”

80 Dean Karnazes is known in the U.S. media as the “Ultramarathon Man,” because in 2006 he completed 50 marathons in 50 days, covering more than 2,000 kilometers. After that, he spontaneously decided to run from the East Coast of the United States back to where he ran the first marathon of this series, to St. Louis, Missouri – like the film character Forrest Gump, for whom continuous motion was a place of retreat. The 46- Inhospitable territory is the training ground year-old is familiar with the looks of of Dean Karnazes. As a management trainer, passers-by “who consider people like the “Ultramarathon Man” shares his experiences with managers. me, who don’t pursue a normal way of life, to be some kind of freak.” But maybe the astonished glances are due to the fact that in fall 2008, Karnazes Each one has developed his own was running through the parks of San method for overcoming the fear and Francisco wearing thick winter clothes pain he is confronted with during his despite a mild 20 degrees Celsius “to adventures. When Karnazes “hits the train for the heat and expected prob- wall,” as he calls the low point of a lems with body ventilation” in prepa- run, “I break the task up into a lot of ration for the desert marathon. small parts; I take one good step and Extreme athletes follow a rigid diet, then the next good step, and at some are disciplined and undergo rigorous even kicks of his feet, pressure equal- point I am there.” This form of self- training. You won’t hear them com- ization at 10 meters, 25 meters and hypnosis is called dissociation. plaining. “I have been in training for 50 meters. Everything is quiet. Trubridge also tries to program his so many years,” says Karnazes, “that “Breathing sets the rhythm of our brain before the dive. He visualizes I no longer have to force myself to do life,” he says, “and when this natural the descent, each maneuver, the turn- it. Running is a part of my personal- metronome goes silent, time stands ing point; attempts to “anticipate ity.” Here the athlete shows himself still.” At this point, the extreme ath- problems and internalize solutions.” to be a student of Aristotle, who in lete becomes an existential athlete. Under stress and the enormous pres- his moral philosophy stated that man sure at depth, you can’t rely on your only learns traits if exposed to situa- With diet, endless planning and med- decision-making ability. “Through tions that demand them. ical examinations finally behind them, visualization, I have already success- Above the Blue Hole at Long Island is the athletic performance of these fully completed the project before a small white platform – the base sta- men becomes an act of meditation. I even start the dive.” The power of tion for the expedition into the abyss. “These are the most vibrant and beau- imagination generates confidence. Trubridge is floating on his back in the tiful moments,” confirms Dean Kar- One lesson you can learn from ex- water and breathing in time with the nazes, “I can finally really relax.” treme athletes is that, although you waves. “Breathe-up,” he calls it – slow- Thomas Bubendorfer describes how cannot change the material world and ing down the circulatory system and he feels when climbing in the same its laws through pure strength of will, stocking up with oxygen. He has to try way. “All that matters is the next hold you can change the perception of this and collect his thoughts and emotions and how it fits into the route. A wall world. And suddenly, you discover before the dive. “If I am worried, my has to pose enough of a challenge so new ways and the energy to overcome heart beats faster and consumes un- that I am not able to think about any- yourself again. For these men, there necessary energy.” The extreme ath- thing else – until there is no distance is no ultimate performance, no final lete lies motionless in the water. He between thought and action.” He be- frontier for pushing themselves to the takes two more deep breaths, turns in lieves that this recipe for happiness limit. There are only challenges. a fluid motion and dives. can also be applied to everyday life. “Standing still is not an option,” says Trubridge follows the white rope lead- The athletes sometimes sound like Bubendorfer. ing to the ocean floor like a maritime Buddhist monks. “The most important Tobias Moorstedt works for Süddeutsche guardrail. His eyes are half-closed. All thing of all is to be able to control Zeitung, Neon, GQ and Handelsblatt, of his actions are automatic now: the your thoughts,” says Bubendorfer. among others.

81 Photos: Peter Rohrmoser, Patrick Becker/FPA, Richard Robinson (2), The North Face (2) (2), Robinson Richard Patrick Becker/FPA, Photos: Peter Rohrmoser,

Ingenuity Haute couture for the soul An Audi unleashes feel-good hormones. That’s especially true for the creations from quattro GmbH. This luxury manufacturer converts production cars into unique works of art. To make sure that every customer’s wish is fulfilled, the number one rule in Neckarsulm is: Anything’s possible.

Copy Robert Kittel have just arrived from New Zealand “People want to be noticed more, and their faces say more than a thou- want to be different.” This phenom- here is a saying: “Don’t dream sand words. Their eyes sparkle when enon is also very evident on the Inter- your life away. Live your they see the white R8. Their smiles net. Social networks and communities T dream!” Neckarsulm, barely broaden as they inspect the fine demonstrate that the “new” con- an hour’s drive north of Stuttgart, leathers, the exquisite woods, the dis- sumers like to display their personal brings you just a little closer to that tinctive alloy wheels and the diversity side and have no qualms about show- goal. The Audi plant, also home to of colors in the adjacent showroom. ing personal vacation photos to total quattro GmbH, is near the center of They compare different kinds of leather, strangers on the Internet. town. And there is no better name decide which wood grain they like for it than “dream factory.” It’s where best and choose their favorite metal- The experts from trendwatching.com production cars are converted into lic shimmer. This is where car lovers in Amsterdam take it a step further: unique masterpieces. You could call can experience the full spectrum of This new willingness to show what it automotive haute couture. automotive feel-good culture. Making others don’t have is a new ideology. Upstairs in the enormous entrance lob- the different choices is deliciously “Consumers want other people to fi- by of the Audi Forum Neckarsulm stand difficult. Anyone who has ever sat in nally see them as they see themselves,” an extremely low-slung, white Audi R8, a morning dew green Audi A5 with ala- says trendwatching chief Reinier Evers. and Thomas Degenhard – gray suit, local baster white leather upholstery and While they like to stick to known accent. Mr. Degenhard is a customer ash wood inlays knows the burst of brands, they also prefer a personal service representative at quattro GmbH. feel-good hormones such an experi- note or a limited edition. The textiles But he isn’t just selling cars: He sells ence unleashes. and fashion industry was the first to dreams. Customized dreams. Later, Degenhard leads the way into clue into this. Sports shoe manufac- While Degenhard leads the way through the Nuvolari Restaurant located down- turers started to sell individually the lobby, he mentions some VIP stairs in the huge building. The interi- “tunable” sneakers early on – where guests he is expecting next week from or looks a little like a New York design a well-fitting shoe wasn’t the only the Far East. “They are coming here all hotel: Works of modern art decorate thing that mattered. Not much later, the way from Tokyo to get some in- the walls. This is where customers the luxury couturiers also “discov- depth advice.” Customers from the who have come to pick up their new ered” mass customization. A suit off United States also regularly come to car are invited to a meal. the rack in high-end design, tailored quattro GmbH to pick up their new car Individuality is in demand. Audi trend to the customer’s measurements and themselves. They combine the car’s researchers confirm that “individual- in a personally selected combination maiden voyage with a tour of “Old Eu- ization is one of the megatrends. Cus- of colors and fabrics was just what rope,” driving their new car to Bremer- tomers of the future won’t be as re- customers were looking for. haven personally so that it can be served as they might have been just a shipped onwards. Three customers few years earlier.” 20 years ago, pri- Incoming orders are also increasing at vacy was still society’s most precious quattro GmbH and thousands of unique privilege. People are a lot more Audi vehicles are leaving the factory A dream comes true: the Audi R8 V10*. open about their personal lives now. every year. It’s the most exclusive way

* Fuel consumption and emission figures at the end of the Annual Report. 83 Vorsprung Ingenuity

Second home: Top- quality leather trim and office package in the Audi A8.

“Diamonds in the dashboard, an A8 in pink – the extraordinary is all part of our daily routine.” Armin Weber, Marketing Manager of quattro GmbH in Dubai

to drive an Audi. Whether electric cur- comes the need to understand and re- spectacular paint job, maybe even tains for the rear windshield, initials spect each customer’s cultural envi- gold side mirrors, and of course strik- in the inlays or a built-in refrigerator ronment. Of course, clientele looking ing rims,” relates Degenhard from in the back – with a workforce of for extravagant special appointments years of experience. Germans, as well around 800, the quattro team can ranging from a bar to leather that as Swiss and Austrian customers, on make anything happen as long as it is matches their tie tend to be concen- the other hand, are more interested in technically feasible. The only taboos trated in the high-end sector as far as having a customized interior. As for are using leathers from endangered price and models go, with the Audi R8, the English, they’re bolder in their species, tropical woods and anything A8 and RS 6 models in the lead. choice of colors than other Europeans. that might create an onboard hazard. But since there are important differ- The trend towards customization is ences between individual markets, Back downstairs, a couple is just pick- particularly pronounced in the Arab the watchword is “Think globally and ing up their new A8. In a custom col- world, where the order placed by a act locally.” That’s why quattro GmbH or, of course. The car is parked right in businessman for an A8 in pink with maintains designated sales customer the center of the showroom; so finely green leather throughout the interior representatives with showrooms in polished, that the pair can see their is not considered unusual. “A TT with important cities like Moscow, Beijing, reflections. A little later, as the A8 diamonds in the dashboard, an A8 Riyadh, Stockholm and New York. On slowly drives out of the showroom, with two-tone body paint or a trunk request, these specialists will also Thomas Degenhard looks pleased as converted into a refrigerator – the ex- take their laptops and samples cases he watches them drive off. traordinary is all part of our daily rou- with them directly to the customer. Robert Kittel, columnist for Wiener, also tine,” says Armin Weber, Marketing quattro GmbH prides itself on its writes for GQ, brand eins and Stern. Manager of quattro GmbH in Dubai. Of customer proximity. course, notes Degenhard, it is important Customers in Moscow also have differ- DREAM FACTORY to remember that customers from Abu ent preferences from those in Berlin, quattro GmbH fulfills virtually Dhabi aren’t the same as customers London or Paris. “A Russian customer any wish. See for yourself: from Dortmund. With globalization is particularly interested in getting a www.audi.com/ar2008/ingenuity

84 Photos: Jan van Endert/AUDI AG, Gaukler Studios/M. Miklas/AUDI AG AG, Gaukler Studios/M. Miklas/AUDI Photos: Jan van Endert/AUDI //////// 4 x VORSPRUNG IN //////////////////////////////////////////////////////////////////////////////4min.

Innovation created by Audi: seven-speed S tronic

01 SEVEN-SPEED DUAL-CLUTCH TRANSMISSION The Audi brand unveiled another example of pioneering technology in the past year in the guise of a seven-speed S tronic dual-clutch transmission for the Audi Q5. Thanks to its slick gear changes, it has efficient propulsion and agile thrust with virtually no interruption to the power flow. In combination with longitudinally installed engines and quattro permanent all-wheel drive, the seven-speed S tronic show- cases the typically sporty drivability of an Audi.

02 03 04 10 YEARS OF AUDI EFFICIENCY STARTS MORE FROM ONE ACCIDENT RESEARCH WITH THE ENGINE TANK OF FUEL An “accident-evading car” – In launching the Audi valvelift 1,650 kilometers on just one wishful thinking? Everyone at system, the Audi brand unveiled tank of gas (65 liters) – that is the Audi Accident Research Unit a technology that permits intel- what 40 Auto Bild readers (AARU) is striving to make this ligent control of the intake achieved in a fleet of Audi A4 2.0 vision a reality. Since 1998, valves on six-cylinder FSI en- TDI* cars (88 kW/120 hp) during AARU experts – in cooperation gines and the exhaust valves on an efficiency marathon through with the Regensburg University four-cylinder turbo FSI engines – Austria and Switzerland. And Hospital and the Bavarian Min- thus boosting both power and they beat the official average istry of the Interior – are often torque, while at the same time consumption figure of 5.1 liters: called upon to track down evi- improving fuel efficiency. Audi The winning team averaged dence when an Audi model is engine developer Dr. Stefan 3.32 liters of diesel per 100 kilo- involved in an accident. Techni- Dengler, who masterminded meters. In the “Audi Efficiency cal, psychological and medical this technology, was presented Tour 2008,” 3,600 existing and findings can then be channeled with the Hans List Award and prospective customers were also back into the vehicle develop- 50,000 euros in prize money able to find out for themselves ment process. The objective is to by the Graz-based engine and how efficient Audi models are. increase general road safety and powertrain developer AVL List The two-day fall event held in to further improve active and (September 19, 2008). 10 German cities sought to iden- passive safety and driver assis- tify the most efficient driver. tance systems.

* Fuel consumption and emission figures at the end of the Annual Report. 85 Photos: AUDI AG Cult icon Good vibrations Along the trail of the Audi Mileage Marathon, U.S. writer and music journalist Marc Spitz tracks the sounds of rock ’n’ roll, country and blues. The result is a deeply personal travel diary about well-known and less- than-famous sites of cult worship in American music.

A lot of careers kicked off in CBGB, a New York cult club.

86 Copy Marc Spitz and turn it into more expensive condos. The neighbor- Illustrations Matthew Cook hood and some politicians have tried to intervene. I leave New York and head for Washington, D.C., where ost New Yorkers, like myself, pass cultural one of the most gifted soul musicians ever known was landmarks every day and seldom stop to con- born in 1939. As a young boy, this singer was at his Msider them. Occasionally there’s a bronze happiest spending the afternoon on wasteland near his plaque out front that catches the eye, forcing you to family’s home, where he would sing on the bank of the slow down and acknowledge who slept, worked or died Watts Branch. Today, that very same area is now named inside. Like the one at the Chelsea Hotel on West 23rd after him: Marvin Gaye Park. Street in the trendy Chelsea district. The Chelsea has become a legend unto itself: This is where the voices of

the countercultural and antiwar movements of the An icon of the New 1960s descended – the hotel has been home to artists, Wave era: Debbie bohemians and musicians ever since. Harry of Blondie. We Americans are especially unsentimental about our rock ’n’ roll and pop landmarks, which it can be argued is appropriate. After all, isn’t rock ’n’ roll all about moving forward? And yet, each time a rock club like CBGB – where the careers of musicians like Blondie first began – turns into a shoe store, I wonder whether or not more should be done to keep the memories alive. On this road trip from New York to Los Angeles, I am going to try and cover as much rock ’n’ roll hallowed ground as I can.

The journey begins in my town: New York City. First, I drive up the Joe DiMaggio Highway towards the Bronx. Today, there are DJs, breakdancers and rappers in Aus- tralia, Iceland, China, probably Antarctica too. But there wouldn’t be any anywhere if it weren’t for what happened up here at 1520 Sedgwick Avenue: On August 11, 1973, somewhere between 9 p.m. and 4 a.m., Jamaican immigrants didn’t just play records at one of the many block parties in the South Bronx, for the first time they livened them up by using rhythmic mixing and scratch- ing. Thus, hip hop was born. 36 years after that historic night, rumors are circulating that real estate developers are going to gut this place 88 Cult icon Vorsprung

On to Ohio. Here’s a fun fact that crosses my mind as I Nails and current drummer of Gnarls Barkley. “The ‘in’ cross the state line. Ohio has produced more Presidents district was called The Flats and was full of great bars than any other state in the nation. I would wager that and clubs.” they’ve produced more rock stars than any other. I’m headed for Cleveland on Lake Erie. My destination is not Next stop: Chicago. The Windy City. My kind of “music the Rock ’n’ Roll Hall of Fame – even though the glass town.” The top label for blues and souls can be found in pyramid designed by a celebrated architect has long the heart of the city on 2120 Michigan Avenue – a place been a city landmark. There’s good reason that Cleveland where history was made. It’s where the Chicago blues of all places was chosen to house the pantheon of the were invented as an electrically amplified answer to 20th century’s most successful music: For years, the city the traditional acoustic blues of the Mississippi Delta. had a tremendous influence as a radio bastion of rock ’n’ The original front office and the shipping room where roll. After all, it was here that bold radio DJs coined the all those epochal vinyls were sent out into the cultural term “rock ’n’ roll” in 1951 and regularly played black water supply are still there and completely intact. music. “Cleveland had a great scene back then,” remem- I drive over to the Metro, a club on North Clark Street, bers Chris Vrenna, former band member of Nine Inch where any star of distinction has appeared. “The Metro

89 Vorsprung Cult icon

has always been one of the best rock venues in the world,” endary Sun Records label and the King of Rock ’n’ Roll, says James Iha of Smashing Pumpkins, who played one who died much too young in 1977 at the age of 42. of their first concerts here some 20 years ago. “It has Today his grave on the Graceland estate has become a great sound, a great room, and a history of booking clas- place of pilgrimage for rock ’n’ roll fans from around sic and of-the-moment bands.” the world.

It’s time to head south – like all white kids with indie Onward to the Lone Star State: Texas. I turn onto the record collections do when they need a little soul-ifying. legendary Route 66 and then follow the tracks of rock ’n’ You will find it here in the Mississippi Delta – the blues. roll to Colorado. The air has gotten gradually thinner and A Blues Trail has just been developed to honor the great the soothing flow of oxygen has been compromised so musicians born and bred in Mississippi. The trail winds it’s time to park. I am in Denver to ponder on the geo- its way through the homes and birthplaces of the most logical wonder that is Red Rocks, a natural amphitheater famous singers, blues bars of all sizes, museums and forever chiseled in the rock of the mighty mountains. even cemeteries. Throughout the state, commemorative The careers of some of the most successful rock bands of plaques mark the individual stations. One day, there our time took shape on this sacred ground. Hardly any should be over 120 plaques. other place in the world can provide such an imposing backdrop to stage performances that guarantee a lasting People also come to pay homage to their own ancestors impression as Red Rocks. in the southwestern Tennessee metropolis of Memphis. A center of the slave trade and hard-fought key city in Now headed north, somewhere between the Grand Canyon the American Civil War, Memphis was Afro-American from and Monument Valley I feel myself becoming grouchy early on and so was exposed to the influences of black so I pull into The Mexican Hat Lodge, a bar and one-time music. In the 1960s, Memphis rose to the status of dance hall where the kind of country music that made, music capital of the United States – as home to the leg- well, this country great, first emanated.

90 Classical child prodigy and flashy Las Vegas show- man: Liberace.

I drive on through the night. Suddenly, the lights of Las Vegas appear in the distance. They say you can see the lights of Sin City, as they call this desert beauty, from space. Where else could Liberace – who began his career as a classical child prodigy and finished it as a flamboy- ant entertainer – and his theatrical persona have been so at home? I head to the old part of the Las Vegas Strip, down East Tropicana Avenue to a deceptively unflamboy- ant building. It’s no more pink neon than your average Chinese take-away. Liberace’s legacy is preserved here – mainly behind glass.

Leaving Vegas for California, the next must-see is in Lake Tahoe. The Cal Neva Lodge & Casino used to belong to one of the most important singers and entertainers in U.S. history. Lake Tahoe runs second only to his birth- place of Hoboken, New Jersey, as the greatest place of cult worship of Ol’ Blue Eyes. There are dozens of sou- venir stores here and, of course, the casino. Built in 1926, the place later acquired true celebrity status. Among its regulars were Hollywood stars and a U.S. President. Being a nerd from Long Island, staring across Crystal Bay in a pair of vintage sunglasses, I realize that

I am in a place that defines the collective memory of the United States. The final leg of my journey takes me from the mountains encircling Lake Tahoe to the Pacific Ocean. You can’t talk about California without mentioning the beach culture. Countless bands have tried to put their stamp on the up- beat songs and polyphonic choruses that belong to the refrains of the Sunshine State’s laid-back California Feel- ing. The melodies even make me smile reflexively. As I cross the desert on my way into L.A., I think about all the raves that were held out here in the 1980s and early 1990s. Before rave and gangsta rap, there was of course L.A. punk.

When I arrive in L.A., I park my car on Hollywood Boule- vard and walk down North Cherokee Avenue, which used to house the entrance to The Masque – one of the first underground punk clubs in L.A. “It was a bomb shelter during the nuke scares in the 1950s,” recounts Brendan Mullen, the club’s founder. The entrance is now closed off by a chain-link fence. If you want to search for the milestones of American music history in this country, you will have to drive from ghost to ghost. So you should have a really good car.

91 Efficiency Triumphant TDI During the Audi Mileage Marathon 2008, TDI technology passed the ultimate efficiency test. While traversing the United States, currently the world’s cleanest diesel engine also demonstrated its superiority in the Audi Q7 3.0 TDI*.

road trip clear across the United States: from New (over 4,800 miles), 13 daily stages and took the participants York to Los Angeles, from metropolis to metropo- through open expanses, over hills, through metropolises A lis, from coast to coast. “Going west” is a cor- and past wonders of nature like the Grand Canyon. Yet nerstone of the American experience. The Audi brand has the Mileage Marathon was no theoretical experiment in penned a new chapter in the spellbinding tradition of extreme fuel efficiency; instead, it realistically mimicked crossing this continent: efficiency. In its first starring role everyday driving. Whether in Chicago traffic, on a Tennessee on the U.S. stage, TDI technology demonstrated its pairing highway or on a winding Rocky Mountain pass, the TDI un- of excellent drivability and remarkable fuel efficiency. During leashed its full potential, demonstrating its efficient opera- the Audi Mileage Marathon, some 200 participants from tion under realistic conditions on urban and rural routes. 15 countries experienced different facets of the United States. And they subjected the new Audi models to an extra- The green flag was waved in New York’s Central Park at ordinary test run – among them was the Audi Q7 with TDI 9 a.m. on October 6, 2008. The Audi fleet, consisting of clean diesel, currently the world’s cleanest diesel technology. 23 vehicles from four model lines, mastered Manhattan Audi did not choose the shortest westward route, but rather traffic en route to the first-stage destination: Washington, the most varied. It encompassed over 7,800 kilometers D.C. From there, the route proceeded via Cleveland to

92 * Fuel consumption and emission figures at the end of the Annual Report. Chicago. Subsequent daily stages – as long as 870 kilome- figures. Calculated under the supervision of the independ- ters (541 miles) each – took drivers southward along ex- ent International Motor Sports Association, these statis- tended farmland. Memphis, Dallas and Denver were addi- tics emphasize the efficiency of TDI technology. The best tional test-run destinations. Audi A4 3.0 TDI consumed an average of just 5.3 liters of diesel per 100 kilometers. And the new performance SUV What is currently the world’s cleanest diesel made its de- Audi Q5 3.0 TDI required just 6.1 liters. The Audi Q7 3.0 but at the Audi Mileage Marathon. Thus, the Audi Q7 3.0 TDI clean diesel achieved a best figure of 7.1 liters. The TDI clean diesel faced its first real-world endurance test prize for the best fuel efficiency went to the Audi A3 Sport- several months prior to its scheduled 2009 launch in Eu- back 2.0 TDI: a mere 4.7 liters! The fuel consumption of rope and the United States. The exhaust emission-control TDI vehicles is thus as much as 40 percent lower than simi- system reduces nitrogen oxides by as much as 90 percent lar, gasoline-powered vehicles typical in the United States.* and meets what is currently the world’s most stringent emission standard: California’s ULEV II BIN 5. And it al- TDI engines are just one element in the Audi brand’s ready meets the emission limits of the Euro 6 standard, integrated strategy of further reducing the emission of

not expected to come into force before 2014. CO2 and pollutants throughout the product range. Here By the time the Audi fleet crossed the finish line on Octo- the company is combining the great potential of its ber 19, the drivers and their vehicles had completed a journey modern combustion engines with the synergies of new through extremes: Within just hours, the tour stretched technologies. from Death Valley – still 33 degrees centigrade even in Oc- Along the many-faceted routes between the East Coast and tober – to the snow-covered Sierra Nevada mountains. West Coast of the United States, Audi diesel technology It then passed through the natural beauty of Yosemite proved once again that excellent fuel efficiency and sporty National Park to Monterey and on southward along the handling are not mutually exclusive and that innovative Pacific Coast. The Audi Mileage Marathon concluded in Los developments such as TDI clean diesel lay the cornerstone Angeles’ Santa Monica with outstanding fuel-efficiency for the automotive future.

ROAD TRIP ACROSS THE UNITED STATES What’s it like when currently the world’s cleanest diesel drives clear across the land of opportunity? Find out here: www.audi.com/ar2008/efficiency

The Audi Mileage Marathon also passed through Monument Valley’s one-of-a-kind landscape. Photo: AUDI AG 01

Perfection Making our own luck Peugeot was hoping its extremely fast racing cars would win this year’s 24 Hours of Le Mans. What followed was one of the most exciting duels in the history of the endurance classic. In the end, a well-practiced team prevailed: Audi. The French motorsports journalist Carole Capitaine from L’Équipe was there.

02 03 Copy Carole Capitaine Photos Anke Luckmann

had been looking forward to this weekend for an entire year! To be more precise, ever since the late after- I noon of June 17, 2007, when the defeated Peugeot team announced that it planned to end Audi’s dominance the next year. They wanted nothing more than to finally bring the Le Mans trophy back to France. The 76th running Every move is perfectly orchestrated: A top team takes care of both of the 24 Hours of Le Mans had every chance of going down car and driver. as one of the most exciting in history. A promising stage was set. On the one side, multiple champion Audi with the R10 TDI, which scored a historic victory in 2006 as the first diesel-powered winner, but whose technology had car’s potential. They don’t want to spoil the surprise for us already been pushed to its limits. On the other side, the sports journalists. Things are calm at Audi. While they Peugeot team hoping to rekindle the glory of the early won’t be able to wrestle the pole position from their com- 1990s with a well-engineered 908 HDi FAP. As if that petitors, it still remains to be seen whether the French were not enough, both teams sent top drivers from the diesel engines can really deliver such sustained power for a world of auto racing to compete: The “King of Le Mans” full 24 hours. Wednesday evening is the first qualifying Tom Kristensen was driving alongside Rinaldo Capello, session. In pit row, everyone is staring at the monitors as Allan McNish and others for Audi, while Peugeot had se- the first significant lap times are measured. Astonishment cured Formula 1 champion Jacques Villeneuve and other spreads rapidly. Even the officials of the event organizer, talents such as Stéphane Sarrazin. To make a long story the Automobile Club de l’Ouest, can’t hide their amaze- short: On June 14 and 15, 2008, there was no place on ment. 33-year-old Stéphane Sarrazin blasts around the earth a motorsports fan would have rather wanted to be track in the 908 HDi FAP and takes the pole position with a than Le Mans. record time of 3:18.513 minutes! Peugeot also takes second and third spots on the grid. The Audi R10 TDI driven by The race week traditionally begins a few days prior with a Capello/Kristensen/McNish can only manage fourth place – technical inspection at the Place des Jacobins. Hundreds 5.5 seconds behind the leader. It is an unparalleled display of spectators have gathered to cheer on the teams. Excite- of power. ment fills the air. Even the modest performance of the French national soccer team at the European Soccer Cham- The French camp is euphoric. The media are tripping over pionships fades into the background. The number one topic themselves with superlatives, while the French soccer team of conversation is the tough duel expected between Audi is taking some hefty criticism for its 4-1 defeat against the and Peugeot. Some actually believe that the fast cars bear- Netherlands. So French sports fans turn their wounded ing the four rings will win again this year. The team is ac- national pride to Peugeot. Back at the Audi motor home, customed to success and is supposedly too well-practiced the team remains unperturbed. Official statements can be for Peugeot to actually offer any serious competition. Even summed up as follows: “Yes, we expected it; no, we are far so, most people are convinced that the German team’s from accepting defeat; by Monday, nobody will remember winning streak will finally come to an end. who was on pole.” Only the race matters: 24 hours, 75 per- Behind the scenes, there are wild rumors flying about the cent of which is driven at full speed. Peugeot 908’s expected lap times. It is supposed to be Dark clouds begin to form shortly before the 3 p.m. start incredibly fast, needing only 3:21, 3:20 minutes to com- and it looks like rain. The meteorologists’ predictions make plete a 13.629 kilometer lap. Isn’t that wildly exaggerat- the competition even more charged. When, how hard and ed? The managers of the French team are keeping a low how long will it rain? On the starting grid, a few minutes profile and smile cryptically when I ask them about their before the warmup lap, nerves are taut to the point of snapping. The drivers eye each other critically and size up their opponents’ cars one last time, while the race engineers hurry to their respective command posts. They won’t 01 Victory! After a hotly contested 24 hours, the Audi team wins the world’s toughest race. see each other again until the same time tomorrow – at the 02 Ready for a tire change. foot of the podium. And, in between, an afternoon, a long night, a dawn and another half a day – roughly 5,200 kilo- 03 Each pit stop is an adrenaline rush for the crew. Every second counts. meters at an average speed of 216.3 kilometers an hour.

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LE MANS LEGENDS Michael Dick, Member of the Few racetracks are surrounded by more legends than the Board of Manage- circuit in northwest France. Here you can find out why: ment for Technical www.audi.com/ar2008/perfection Development, AUDI AG

The pit stops are the only thing that will keep man and machine intact over the 381 laps. So much for the bare facts. But the 24 Hours of Le Mans is notorious for its surprising turnarounds. And rightly so, as we see once again: The three Peugeots dominate the first two hours of the race, Striving for perfection when suddenly the tide turns. Transmission problems to me means … cause the leading 908 HDi FAP to pit for 20 minutes. When the second-place Peugeot also drops back due to a head- light problem, Audi briefly takes the lead, but is quickly passed again by the Number 7 Peugeot. The rivals race into the night. By around 8 p.m., there is less than one lap separating three Audi cars and two Peugeots.

The Capello/Kristensen/McNish Audi R10 TDI continues to lap steadily. Everyone at the Audi command post is deeply … drive and motivation. It has influenced my concentrated; they are working quickly, efficiently and pre- actions for as long as I can remember. I have al- cisely. A few meters away, the Peugeot technicians are hav- ways been fascinated by technology. Taking toys ing an uneasy night. The cars have to return to the pit sev- apart and putting them back together again – eral times to have their radiators cleaned out with a high- especially toys with tires and a steering wheel – pressure hose. A defective battery costs the Number 8 car was always a special experience for me. The idea valuable minutes. When the rain starts at about four in the was never to take them back to their technical beginnings, but to make the toy better, faster, more sophisticated. And over the years, this “The contrast between the teams passion became my profession. could hardly be greater: Peugeot frantically switches over to the rain Mobility is and will remain a concrete expression setup, while the Audi drivers just con- of individual freedom and thus a basic human sult briefly with their engineers.” need. The automobile with all its emotional as- Carole Capitaine, Motorsports Editor at L’Équipe sociations has played a significant role here for over a century now. And during this time, by continuously developing and refining new products morning as predicted, the situation intensifies. The con- and technologies, the Audi brand has left a trast between the two teams could hardly be greater: strong mark on the automotive world. Light- Peugeot frantically switches over to the rain setup, while weight design, quattro, Audi duo, TDI and TFSI – the Audi drivers just consult briefly with their engineers on just a few of its pioneering achievements. the proper tires. In the early hours of the morning, Tom Kristensen takes the lead from Jacques Villeneuve, but the Regardless of what you do, the way to the top is gap between the cars is unbelievably close – 16 hours after a direct reflection of the goals you set for your- the start, they are only 20 seconds apart, though the self. Customers today expect us to deliver superior Audi R10 TDI is handling the wet road conditions much quality and unmatched driving performance with better. On Sunday afternoon, 24 hours after the start of maximum efficiency, coupled with inspiring de- the race, the Audi driven by Capello/Kristensen/McNish sign. And that’s also what we want to deliver. It wins the world’s toughest race by 4:31 minutes. is therefore eminently important for each and every employee to perform his or her duties skill- There are tears of joy in the Audi camp. It was a narrow fully and with great dedication and devotion – victory – and a little surprising. There are also tears at Peu- always striving to develop, produce and sell a geot. It’s a huge disappointment; and totally unexpected. perfect product. Only by striving for perfection How could the clearly faster car lose the race? Peugeot will will we be better tomorrow than we are today. have to answer this question if it hopes to win next year. And I will be there again as well; I wouldn’t miss the next round of this historic duel for anything in the world.

96 Photo: AUDI AG Lorumipsum Vorsprung

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01 DTM Audi driver Timo Scheider wrapped up his first DTM (German Touring Car Masters) title with a victory in the final race of the season at Hocken- heim. Last year’s winner, Mattias Ekström, finished third overall. With eight pole positions and six victories in its debut year, the new Audi A4 DTM was the season’s most successful car.

02 03 04 24 HOURS OF AMERICAN LE MANS LE MANS LE MANS SERIES SERIES The Audi R10 TDI remains un- With its third one-two finish In its very first season partici- defeated in the 24 Hours of in a row, AUDI AG secured the pating in the European Le Le Mans. In June 2008, the title in the American Le Mans Mans Series, Audi Motorsport diesel-powered racing car series before the end of the claimed the championship won the French endurance racing season in August 2008 with the Audi R10 TDI. A classic for the third year in a in Mosport, Canada. Audi fac- fourth-place finish at the sea- row. This is the second time tory drivers Lucas Luhr and son finale in Silverstone (UK) that Audi has achieved the feat Marco Werner not only won was enough to secure the driv- of three consecutive victories the Grand Prix of Mosport in ers’ title for Alexandre Prémat here. The Audi driver team of the Audi R10 TDI, they also and Mike Rockenfeller. The Dindo Capello, Tom Kristensen won the drivers’ title in the manufacturers’ and team title and Allan McNish won the LMP1 class. also went to Audi. Fast laps, a extraordinarily exciting 76th good strategy and excellent pit running of the race in front of stops were the keys to victory 258,000 spectators. for Audi drivers Dindo Capello and Allan McNish in the last race of the season.

97 Photos: AUDI AG 98

Sustainability In-house ecosystem A new generation of skyscrapers features impressive climate-friendly technology. Top architects of our times are designing and building self-sustaining showcase structures around the globe, including New York’s Hearst Tower.

Copy Carmen Stephan prestigious landmarks in sprawling metropolises, embody- ing a feeling of status and importance, they also demon- rom far away, the building looks like an upscale, strate the further advances in technology. Walking down futuristic beehive: a honeycomb grid applied to the New York’s 57th Street today and seeing Hearst Tower F facade and illuminated in dark blue. With New shimmer through the forest of skyscrapers, you marvel not York’s Hearst Tower, architect Sir Norman Foster has suc- only at the elegance of the monolith, but also at the eco- ceeded in creating an especially stylish icon, winning him logical significance that has made it famous. “Hearst Tower the 2008 International Highrise Award among others for is a kind of role model,” says Professor Stefan Behling, the 182-meter tower. But that’s not actually the subject of senior partner at the offices of Sir Norman Foster. “Sus- this story. Contrary to the norm, how a skyscraper looks tainability has become a very important goal and one that plays only a supporting role here. everyone is going to have to comply with. In the future, First, a few facts. 85 percent of Hearst Tower is made out of no one is going to be able to afford continuing to ignore recycled steel. It uses 26 percent less energy than compa- sustainability.” rable skyscrapers, saving 1,070 metric tons of carbon dioxide a year. Water for the “icefall” in the lobby is provided Architecture is already preparing to take the next step for- by rainwater collected on the roof, as is the case for the air ward. Future towers will not only surround us with light conditioning system and water for the plants. Hearst Tower and heat within their own four walls; to some extent, they is the prototype of a new movement in which skyscrapers will also share this energy with others. Regenerative energy no longer garner attention for their record heights and recovery usually produces more energy than the building symbolic external appearance, but strictly for their sophisti- actually needs. The giant wind turbines and photovoltaic cated, in-house ecosystem instead. facades used to produce the energy turn skyscrapers into There was a time when sustainability was no more than a power plants. One innovative example of this revolutionary trendy label applied to buildings. The words “solar” and approach is the planned 309-meter high Pearl River Tower “green” only seemed to spring forth from the mouths of designed by Skidmore, Owings & Merrill (SOM) to be built ambitious architects. It was all about shiny packaging: Its in Guangzhou, China, almost 200 kilometers from Hong actual content was hardly noticed nor was it taken seriously Kong. The environmentally friendly giant will tap energy enough. But architecture is currently making great strides from wind and sun, and produce surplus energy. As the in giving this subject the emphasis it deserves. Sustainabil- building leans into the wind like a gigantic sail, the shape ity has gained intrinsic value among major builders, and is of the facade guides the airflow into the tower’s two a trademark of anyone who wants to take our future and its cavities, activating turbines that generate electricity. In- challenges seriously. Skyscrapers are ideally suited to con- house energy consumption will also be greatly reduced by veying this conviction. Not only have they always served as using as much natural light as possible, rainwater and so-

01 02 01 ROTATING TOWER With levels that rotate on their own axes – powered by wind turbines – this green giant is scheduled to begin twisting into the skies above Dubai in 2010.

02 PEARL RIVER TOWER The new landmark in the Chinese city of Guangzhou actually functions as a power plant. The shape of the facade guides the airflow into two integrated wind turbines to generate electricity.

100 Sustainability Vorsprung

Ulf Berkenhagen, Member of the Board of Manage- ment for Purchas- ing, AUDI AG lar energy to heat the water. SOM describes the project as an “iconic high-performance structure designed to be in perfect harmony with its environment.” In the past, the external appearance of a building needed only to conform to its natural surroundings. Today’s buildings are trans- forming into organisms that seek direct interaction with their environment – a constructive symbiosis between architecture and nature.

Another ecological giant straining towards the heavens is Sustainability planned for Dubai. Florence-based architect Dr. David to me is … Fisher designed the 420-meter high rotating tower, which envisions a unique change of scenery. According to Fisher’s concept of “Dynamic Architecture,” the building’s appearance will be in constant motion by means of individual levels rotating independently on their own axes. Silent wind turbines installed between the floors will turn the individual levels, which are going to be layered on a central col- umn like the layers of a cake. If all goes as planned, the … the essential criterion for a company’s compet- structure should be completed by mid-2010. “We are living itiveness and future viability. Because when we in a dynamic world, so the spaces we live in should also be act sustainably, we automatically think about to- dynamic,” says David Fisher. “Buildings will flow with the morrow … today. Such a forward-looking way of rhythm of nature; they will change their direction and their thinking is the basis of our success. form from spring to summer, from sunrise to sunset, and will adapt to the weather. Buildings will come alive.” This When it comes to purchasing, one word usually new generation of high-rise buildings reflects more than springs to mind: price. But today purchasing has just the social consensus that everything possible must be a much wider significance. It is about costs and done to prevent climate change. The value of the “green overall profitability coupled with the highest de- tower” is steadily increasing because it is a win-win situa- mands on quality. Designing vehicles that have a tion for all parties. It gives architects a rewarding new coherent price-performance ratio is something challenge and a chance to build their reputations. Its for which we in purchasing bear a large part of clients are able to save energy long-term, and its renters the responsibility. Sustainability, however, means are no longer subjected to fluctuating gas and oil prices. more to us than simple economics; we also con- People working in green buildings find the pleasant tem- front the ecological and social challenges. peratures, abundant sunlight and well-filtered air much more comfortable to work in – they even call in sick less We see ourselves as partners to our suppliers often. “This new architecture is going to change the way and want to cultivate reliable long-term relation- manmade environments are perceived – there is going to ships. Our goal is to create lasting, mutually be a lot of discussion on the solutions being developed,” profitable relationships all over the world based says Werner Sobek, an expert in high-rise buildings based on open dialog. That is the only way to work to- in Stuttgart. He believes the criticism of high-rise buildings gether successfully throughout a vehicle’s entire being energy guzzlers is unjustified. “We tend to forget life cycle. that living in a vertical village equates to a drastic reduction in private traffic in the area. And there is always a Innovation is indispensable to the Audi brand. clever solution for handling any increased energy demand The sooner we begin working together with our in buildings, like using a solar-capable facade. We are able suppliers, the faster and better we can be – and to build skyscrapers today that are extremely attractive that holds just as true for quality. In order to from an energy standpoint.” Foster partner Stefan Behling come up with the best solutions and ground- puts it succinctly: “Of course, a small residential building breaking innovations, we need to work more and will always be more energy-efficient than a prestigious sky- more closely with our partners, drawing on their scraper for global players. But, in terms of sustainability, it expertise ever sooner – particularly bearing in is important that each player tries to design and achieve the mind that new development cycles are becoming best they can in their own particular field of expertise.” ever shorter.

Carmen Stephan, a specialist in architectural topics, writes for Architectural Digest, Monopol, Neon and SZ-Magazin, among others.

101 Photos: Chuck Choi, Dynamic Architecture; Skidmore Owings & Merrill LLP, AUDI AG Skidmore Photos: Chuck Choi, Dynamic Architecture; Pride Tracing history in Sant’Agata A Lamborghini is probably the most Italian of all sports cars. A car like its country: passionate and bursting with energy. The cult brand was born decades ago in the narrow streets of Sant’Agata, and the legend remains alive and well today. Here, in the midst of Emilia Romagna, the pulse of the community beats proudly for and with Lamborghini.

102 TOWN OF CONTRASTS In Sant’Agata, the common presence of the conspicuous Lamborghinis is taken for granted. Vorsprung Pride

Copy Sandro Mattioli customer, the people living out here have grown accus- Photos Giorgio Barrera tomed to seeing the fast, finely sculpted thoroughbreds zipping past their fields and farms. The pulse of the com- he afternoon sun is casting its long shadows over munity beats with and for Lamborghini. With a passion. the piazza. The most noticeable structure here is And it’s where the hot-blooded auto brand gets its power. T the whitewashed church. Other buildings include The rock-solid support from the locals provides a wonder- the bar centrale, a bakery and many small shops lined up ful environment for creating extreme sports cars. side by side. Old men seated under the arcades engage in Test driver Mario Fasanetto has the job all the boys in the heated debate. A waitress crosses the square balancing region dream of. He and his colleague Moreno Conti spend five espressos on a tray. Sant’Agata Bolognese seems like every day behind the steering wheel of the power cars from a typical Italian village – until a bright-green Lamborghini Sant’Agata. Fasanetto may be cool-headed, but he puts his suddenly enters the village’s main road. It growls softly heart and soul into his job. And while others might be as it rolls down the street, reaches the end of the village tempted to show off a bit, he goes about his work calmly and accelerates. and professionally. Every year, 43-year-old Fasanetto drives Lamborghini sports cars are taken as much for granted here 100,000 kilometers in these supercars to prepare them for as is pasta in the ristorante. Sant’Agata is world famous life on the road. During the development phase of new and it’s all thanks to one man: Ferruccio Lamborghini. The models, he pushes them to their limits on the racetrack to engineer and car enthusiast brought glamour to this little see what is possible. “My maximum speed was 340 kilo- town situated between Bologna and Modena. By uncom- meters per hour,” says the professional driver, whose easy promisingly pursuing an ideal of beauty and perfection, elegance and penetrating glance could just as easily qualify he created a legend that is the pride of the residents of him as a James Bond actor. For the endurance tests, Sant’Agata – today more than ever. Fasanetto accompanies the engineers as they travel around “The first Lamborghinis start to drive by on the road up the world with the prototypes. At Lamborghini, test drivers here at seven in the morning,” relates the farmer, wielding and engineers are always in close contact. “My work carries a wrench as he repairs the tractor in his barnyard. For him, a great deal of responsibility. My information and assess- these streamlined speedsters are just an everyday part of ment of the vehicle must be reliable, because the life. He even knows many of the test drivers by sight and engineers are relying on my input,” he explains. waves to them as they drive by. Since each of these supercars is test driven extensively before being delivered to the Fasanetto speaks with the accent typical of the region, which you hear everywhere as you walk through the factory workshops, the cafeteria or anywhere else in the company. That’s 01 02 because the Lamborghini workforce, now numbering around 990, has strong ties to this region. Working in the exclusive sports car factory is the dream of many young people living in Sant’Agata and its vicinity. That should come as no surprise: Ever since Ferruccio Lamborghini’s auto plant delivered the first sports car in 1964, it has shown the automotive world what is possible. Miura, Diablo, Murciélago and Gallardo – these models are good examples of what sets the Lamborghini apart: a unique mixture of Italian design, uncompromising driving performance and extreme luxury. 03 Which is why Fabio Serra, the owner of the restaurant right next door to the Lamborghini plant, has had the opportunity to serve his pumpkin-stuffed tortelloni to many celebrities. He even remembers the Shah of Iran stopping by personally to take delivery of his new Miura. Serra’s trattoria is an institution in Sant’Agata. It gets noisy on Friday nights when the motorsport regulars meet, but it’s quiet at lunchtime. Time to eat. Basta! Prominent customers are actually entertained directly at Lamborghini these days. Even so, the success of the top-tier manufacturer has boosted business at the trattoria. “You find many more suppliers and business people in Sant’Agata these days. And they all stop here for lunch.”

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01 Memories: Donatella Martinelli was a friend of Ferruccio Lamborghini. 02 Neighborhood: Mayor Daniela Occhiali is pleased with the success. 03 Commonplace: Lamborghini is at home in the narrow streets of Sant’Agata. 04 A real find: Miura engine hood on a farm. 05 Deceleration: Rustic idyll plays counterpoint to the Lamborghini temperament. 06 Extreme athlete: Lamborghini derives its power from the country and its people. 01

01 Memorable: the Lamborghini Museum, Centro Eccellenza. 02 Family ties: Moreno Conti (left) works as a test driver, his brother Maner in quality control. 03 Loves the finished form: Claudio Carretti designs auto bodies. 04 Woman power: Engineer Giulia Ganzerla is also from this area. 05 Test driver Mario Fasanetto has a job all the boys in the region dream of. 02 Pride Vorsprung

Almost all the older people in this town of over 7,000 in- 03 04 habitants have some kind of story to tell about Ferruccio Lamborghini, the man with the elegant, combed-back hair. How he loved to be seen with beautiful women. How he much preferred simple meals. How he used to drive by and show off his latest cars. The people here have many anec- dotes to share. Only Donatella Martinelli at the bakery is somewhat reluctant to open up – her relationship with Fer- ruccio was much more private. As a teenager, she doted on the man behind the dream cars. But she didn’t actually meet him until years later, when she and her husband visited 05 the noble vineyards Lamborghini bought after selling his sports car factory in 1972. All of the Lamborghini models were on display here. From then on, whenever Lamborghini came to Sant’Agata, he always visited Donatella and her husband, and shopped at their bakery. “We spent many pleasant evenings together, drinking wine and eating well,” she recalls. “He was like my grandpa.” She was devastated by his death in 1993. Ferruccio Lamborghini touched people’s hearts, just as his cars still do. And that is most obvious among the people who develop, design and build them.

People like Mario Fasanetto. His career development is typical of Lamborghini and shows the versatility that char- THE ATTRACTIVE ITALIAN acterizes the brand’s employees. In 1985, he joined Lam- An extra dose of Lamborghini and further impressions from borghini as an engine design engineer, switched over to Sant’Agata can be found at: www.audi.com/ar2008/pride customer support, took care of classic cars, and finally became a test driver. His colleagues Claudio Carretti, who now works in body development, and Maner Conti, current- her primary focus is local, because the more successful her ly responsible for quality control, have already performed large neighborhood company is, the better it is for her different functions within the company as well. “It’s why town. And so Madam Mayor has nothing but praise for the I have a very clear understanding of what a Lamborghini good relationships with Automobili Lamborghini – especially actually is,” says Fasanetto. “It’s got to be an extreme car. ever since AUDI AG took charge more than 10 years ago. It must have a clearly defined character. A Lamborghini is a car that always lets you feel its power, and which you Since that time, Sant’Agata’s prime mover has been run- climb out of with a smile on your face.” ning at high revs. The results are impressive: In 2008, And sometimes the company provides for happiness of a 2,430 supercars found an enthusiastic buyer somewhere very different sort: Giulia Ganzerla, a 32-year-old logistics in the world. A new record and a remarkable achievement engineer, fell in love with a colleague here. They aren’t the considering that, until 2002, Lamborghini only sold an first married couple to meet in the sports car plant. And it average of 250 of its supercars in any 12-month period. isn’t uncommon for entire families to work for the auto The Audi know-how is paying dividends in both quality brand with the bull in its logo. Giulia Ganzerla and her fam- and production. And there are funds available again for ily are already well on their way to doing this. Though her new designs and product improvement. As a result, son may be only two years old, he is already an enthusiastic Lamborghini now has the youngest and broadest product fan of these cult cars. “My husband and I have agreed never range in its history. And its dealer network has also been to talk about work at home,” she confides. “But then we expanded worldwide. walk into our son’s room and it’s got Lamborghini wherever At the same time, Lamborghini has remained a thoroughly you look!” Italian brand at heart. Many key positions remain firmly Not surprisingly, scale-model Lamborghini cars also deco- in Italian hands. Audi sees itself as the big partner who rate the mayor’s office. For Daniela Occhiali, these vehicles provides knowledge and technology, but who appreciates are works of art, small metal sculptures worthy of a mu- Italian skill and competence in building sports cars. seum exhibition. And yes, she has taken a ride in a full-size “Lamborghini has become more international,” auto-body Lamborghini. “It’s hard to believe you’re sitting in a car, so designer Claudio Carretti summarizes. “We have more extraordinary is the sensation of the acceleration,” she raves. methodology, more organization, more precision, a better Right behind Daniela Occhiali’s massive desk hang three grasp of the whole picture. We have matured.” large flags; the Italian, the European, and – representing Freelance reporter Sandro Mattioli writes for Stern, Tagesspiegel, the whole world – the United Nations banner. Of course, Berliner Zeitung and Financial Times Deutschland. He lives in Rome.

107 Imagination In the land of ideas What do Munich, Ingolstadt and Los Angeles all have in common? All have designers hard at work designing future Audi models. While the vast majority of creative minds at corporate headquarters are working on tomorrow’s cars, the studios in Munich and Los Angeles are developing mobility concepts for the less immediate future.

Copy Titus Arnu, Jochen Siegle turing and work on new vehicle cate- rent trends are discussed – whether it Photos Piet Truhlar, Frank Kayser gories. That’s also the reason why the is the latest Hollywood high-tech car- company decided in 1984 that design toon or even a child’s toy. Creative nippets of English, Italian and shouldn’t just take place in Ingolstadt. people are always on the lookout for Spanish dart through the air. A workshop large enough to create new ideas, and anyone working here SThere is a smell of resin and full-scale models is only one part of is also getting paid to break down bar- clay, the components of industrial the studio. There’s also a large atelier riers in their own heads and let their plasticine, the modeling clay used to where interior and exterior designers imaginations run wild. At times, that hand-sculpt tomorrow’s dream cars. sit at their computers, discussing the can also mean trying out other prod- At the moment, three clay models are contour of rooflines, wheel wells and ucts like high-tech skis, a tabletop covered by tarps in the loft-like work- headlights. A front wall made of soccer game or even a concert piano. shop with the modelers’ sculpting glass bricks lets plenty of daylight tools close at hand. Carsten Monner- into the room. But anyone outside Setting up the studio in the center of jan, Head of Concept Design Munich, expecting to find a trendy glass Schwabing was a deliberate choice. asks visitors for their understanding: palace here is going to be sorely Not only does the trendy neighbor- “Everything here is top secret!” disappointed. An inconspicuous hood have a disproportionate number gateway leads to a rear building in of convertibles and sports cars, there For 25 years, Audi Design has oper- Munich’s Schwabing district and a is no shortage of classic and vintage ated a branch office in the vibrant city back courtyard with a long auto- cars and, of course, those of the com- of Munich. Far enough away from motive tradition. Since the 1930s, petition. “It’s extremely important to corporate headquarters in Ingolstadt auto mechanics have been repairing experience our own automobiles in to allow the designers to work more all types of cars in the “Kurfürsten- the same frame of reference as other independently – and more unconven- garage Schwabing.” There was even a vehicles, and to see how they move tionally – but close enough so that filling station. The old garage sign through traffic,” explains Monnerjan. Audi Group design chief Wolfgang now hangs in the modeling hall. But that’s not the only thing that Egger can occasionally drop by the 14 designers, assisted by model mak- makes Munich such an interesting lo- Schwabing studio to discuss the sta- ers and modelers, work here in tight cation for a design studio. The streets tus and results of projects with his quarters. The confusion of languages are pulsating with life. The university staff. “This is where the trouble mak- sometimes reaches Babylonian pro- and the huge English Garden, Munich’s ers are,” explains Egger with a smile. portions: This is an international team Central Park, are just around the cor- “In Ingolstadt, the designers work in which has grown more and more in ner. Not only are trends recognized close proximity to the engineers and recent years, and the studio space is and adopted early in the Bavarian capi- production, which exposes them to slowly being pushed to its limits. tal, sometimes they are even set here. different influences and keeps them The heart of communication is lo- But how can these creative brains take close to the production model.” cated in the shop kitchen, which dou- such abstract thoughts and convert The Munich designers, on the other bles as a conference room and sepa- them into concrete forms? “We get hand, have more freedom to think be- rates the studio from the workshop. our inspiration from our environs,” yond the narrow confines of manufac- This is where ideas are shared and cur- says Christian Labonte, responsible

108 CONCEPT DESIGN MUNICH In the Schwabing design studio, abstract ideas like “lightness” are gradually worked into real objects until a finished full-scale model ultimately emerges in the modeling hall. Under the strictest secrecy, creative minds headed by Carsten Monnerjan (above) are allowed to give their imaginations free rein – even if it means coming up with a tabletop soccer game in Audi design. DESIGN CENTER CALIFORNIA Claus Potthoff (right) and his team in the Mecca of trends, California, come up with new concepts for automotive architectures and new interior design approaches. But there is a lot of competition between the creative professionals at Santa Monica Air- port and their colleagues in Ingolstadt and Munich to come up with the best design for new production models. Imagination Vorsprung

for design strategy at Audi. A city like directly to the hard model with unpar- like the latest sports shoe collection Munich is a great place to come up alleled results: muscle cars with clean that is already out of fashion at the with new ideas. For instance, is there contours, masculine and aggressive. end of a single season, on average an something to be learned from the air- “A Lamborghini’s look has to aston- Audi will be on the roads for more filled foil panels of the Allianz Arena ish,” says Filippo Perini, design chief than 10 years. In the best case, the or the glass windows of the Herz-Jesu of the Lamborghini brand, “because car becomes an icon – like the Audi TT. Church? Or could Audi Design derive the brand stands for avant-garde and Creating a successor to such a car is something from the detail solutions provocative design.” one of a designer’s toughest jobs. But used in floating facades? How do the Back to Munich: The casual atmos- Egger is convinced that even that is light fabrics of the new spring collec- phere betrays nothing of the pressure possible if one “uses a freethinking tion handle? Needless to say, they the team is working under. “Design is approach and continues to push ideas also engage in dialog with other crea- hard work,” says Monnerjan. “Even two forward.” Like they do in Munich. Of tive professionals. Audi Group design or three millimeters can dramatically course, customers have the final vote. chief Egger says this cultural inter- change the character of a sculpture.” change is an important remedy to Despite all their freedom, sooner or 11 flying hours farther west, shortly tunnel vision. later the Munich designers have to sit before 9 am. Powerful SUVs, sleek sports cars, vans, pick-ups and conventional sedans are moving bumper to “Design is hard work. Even two or three milli- bumper along urban freeways that meters can dramatically change the character span up to 16 lanes. Welcome to L.A.! of a sculpture.” Nowhere else in the world do people Carsten Monnerjan, Head of Concept Design Munich, AUDI AG spend more time in their cars than in California. The VW Group has been operating the Design Center California Auto designers must have a good an- face to face with the design engineers in Los Angeles since 1990 and, since tenna for esthetic and social currents in Ingolstadt to discuss what is actu- 2006, more than 60 designers, artists, and must always be a few years ahead ally possible on a production scale. modelers and engineers have been at of what’s currently happening on the “We can’t sacrifice a single week of work here at Santa Monica Airport. streets. That’s why the creative minds work in this process,” confirms Egger. L.A. is the ideal environment for Audi at Audi are presently focused on He estimates it takes an average of six to design new esthetic dimensions far catchwords like “performance ath- months to complete the theoretical away from what’s happening at corpo- lete,” “new value” and “lightness.” design of a new production model. rate headquarters. “Downsizing isn’t just about building Ideation is the process of coming up smaller cars,” explains Egger. “Down- Designing a vehicle from the first idea with the initial concept in automotive sizing is a strategy. It’s about how we through sketches, 3D views, clay mod- design, and includes the design of are going to define luxury in the future. els, and ultimately to a full-scale new vehicle architectures and car It’s about simplicity, reduced opu- plastic model with real wheels takes bodies as well as the creation of new lence.” And that’s also how Munich years. Time and again, its designers interior concepts or even devising was able to give impetus for the A1. come to the modeling hall to stand new controls and switches. “Our work The first prototype of the smallest before their creation, relentlessly con- here is akin to basic research and Audi scheduled to hit the roads in 2010 templating the surface treatment or trend scouting for the automotive is distinguished by its aluminum- countless other details. The design field,” says Jae Min, who is in charge colored curved roof, unusually sporty chief from Ingolstadt uses marking of Audi Design. design for a compact car and typical tape to indicate any changes they Ideas generated here in close cooper- Audi front end with its distinctive want to make to the model – like ation with Ingolstadt’s design chief single-frame radiator grille. improving the contour of the engine might show up years later as a con- The Munich designers, of course, also hood or simplifying a sidewall. There cept car at one of the big auto shows discuss ideas with their counterparts is significance in every angle; nothing or even in production models. Exam- in Los Angeles and at Lamborghini is left to chance. It is precisely this ples include the conceptual design of in Sant’Agata, even though the Italian obsession with detail that differenti- the Audi A4, the first generation of sports car manufacturer’s Centro Stile ates Audi design. “An Audi has to be the TT as well as the current A8 series. usually works alone on designing recognizable from a distance of 200 On the three floors of the brightly lit its new models. The Italian creative meters,” explains Egger. “Even without interior of the off-white building on team designs almost all its cars a logo. It’s a goal we are constantly Donald Douglas Drive, people are busy entirely on computer. No full-scale pursuing.” He likes to speak of a brand’s drawing, refining, sculpting, being clay models are built here. Data from DNA; its unmistakable character. confronted with virtual designs – and 1:4 scale models are transferred It’s well worth the effort because, un- asking questions. What will cars of

111 Vorsprung Imagination

/ / the future look like? What are the mobile, spending more time on the and gearshift knobs or fabrics for trim global trends? How are tastes devel- road – in part due to the fantastic panels, some of the trendiest materi- oping among American car buyers? weather. “Automobiles aren’t just a als now have a patina, or signs of use. Is it the same in Asia and the Pacific means of transportation in Califor- The worn denim look is also “in.” The area? What can be deduced for Europe nia,” says General Manager Hendrik designers under Potthoff’s supervision from these trends? What esthetic and Veltmann. “A car is an expression of are even experimenting with innovative ergonomic factors are important for one’s personality and so people want high-tech materials that are able to the next-generation global Audi design? to feel as comfortable in their cars cleanse the ambient air in the interior. L.A. is the perfect location to explore as they do at home.” To fully appreci- Interior woods are also being treated these questions and to contemplate ate the peculiarities of the important completely differently than they were new and unconventional vehicles. U.S. market, you have to live here. a few years ago: Thickly lacquered “California has the most progressive wood is giving way to wood with a and experimental automobile culture Judging by the ever-present air con- natural look and feel. “Materials are in the world,” says Claus Potthoff, the ditioning systems and super-wide being treated less and less so that studio’s Executive Design Director. highways, one would hardly suspect their intrinsic character is shown to “What’s more, with its multicultural at first glance that the Golden State its full advantage,” says Lapine. society, the Sunshine State is a trail- has made sustainability a high priority Making such decisions requires exten- blazer in many fields, setting trends for years. In addition to a health- sive lab work, for instance by exam- that other regions will only adopt conscious lifestyle (“Green Living”), ining materials for scuff resistance or much later.” Its proximity to Holly- with organic food available in any durability, which is later retested in wood, for example, and the ability to supermarket, rigid water conservation Ingolstadt. Here too, the L.A. studio swap ideas with scriptwriters working programs and strict energy conserva- provides ideas for the first develop- on futuristic scenarios stimulates car tion codes to regulate construction ment phase, delivering mood boards designers’ imagination. have been in place since the 1990s. with material samples. “That gives our colleagues in Germany a perfect feel for how tastes are trending in the “The subject of sustainability is approached United States,” notes Lapine. much more emotionally and less technically in the United States than it is in Germany.” Also worth noting is an eco-design Claus Potthoff, Executive Design Director, Audi Design Center California study conducted in 2006: the Clear Car project. The purpose of this transparent, virtual model was to demonstrate Whether it’s entertainment, technol- “The subject of sustainability is ap- “how the ‘Green Topic’ could be of- ogy, art, sports or science, the melting proached much more emotionally and fered in an appealingly sporty form,” pot which is California is historically less technically in the United States explains Potthoff. The CO2-free design more open to new things than many than it is in Germany,” says Potthoff. study, which is externally reminiscent other places on earth. And, for years, These factors also influence the de- of classic coupes of the 1940s, was that’s exactly what has attracted the signers’ work. based on an electric propulsion system smartest, most creative and most in- And finally there are innumerable small with fuel cells. The studio’s objective novative brains from around the world. start-ups and initiatives with superb was to present the first utterly appeal- Of course, this is also reflected in the ideas – especially in nearby Silicon Val- ing vehicle with wheel-hub motor, Audi team, where Americans, Germans, ley. “There’s a lot we can learn from proving that “an eco-friendly car doesn’t Italians and Koreans bring individual them,” says Potthoff. This is of particu- mean having to sacrifice on some- facets of their own cultures and men- lar value to the Color & Trim Depart- thing,” notes the Design Center chief. talities with them to the drawing table. ment, which deals with the design of “Believe me, our pencils are sharp- “There’s an incredible amount of talent colors, surfaces and materials. The ened. We do a lot of work in secret, here, and we are benefiting tremen- designers here are constantly on the and of course we also have to evaluate dously from their ideas and sugges- lookout for the materials and colors of our ideas economically.” In view of the tions,” says Min, a native South Korean the future. “There is a marked trend profound challenges facing the auto who originally came to California to toward sustainably produced textiles,” industry, it is easy to understand that study automotive design at the notes designer Sabine Lapine. “Recy- the designers in L.A. are itching to renowned Art Center College of Design cled materials are also continuing to get going. in nearby Pasadena. gain importance – for instance, using No doubt about it: Californians not yarn made of recycled water bottles for Titus Arnu works as a reporter for Süd- only love their cars, they live in them. interior textiles.” The entire esthetics deutsche Zeitung, among others. He lives in Munich. Jochen Siegle reports from San Fran- People interact differently with their of the interior has fundamentally cisco about life on the U.S. West Coast for vehicles here. They tend to be more changed. Whether it’s leather for seats Spiegel Online and die ZEIT, among others.

112 //////// 3 x VORSPRUNG IN //////////////////////////////////////////////////////////////////////////////3min.

01 NEW AUDI FORUM INGOLSTADT AUDI AG’s visual identity has gotten a new look: The Audi Forum Ingolstadt reopened to customers and visitors in March 2008 after the completion of remodeling work in record time – just 10 weeks. The new car collection center, museum, factory tours, catering, independent cinema, events and service facilities create an even more exclusive world of experience. The new premises have a stunning black and white design, in keeping with the updated Audi showroom concept.

02 CAR VERSUS SKIER An extraordinary race took place in winter 2008 between the Audi S5 and the French Alpine skier and Olympic champion Antoine Dénériaz. The S5, piloted by Audi factory driver Alexandre Prémat, took up the challenge of driving down a ski slope in Val d’Isère on ordinary tires. The Audi S5*, with its 260 kW (354 hp) and quattro all- wheel drive, mastered the slope safely and with poise, demonstrating extraordinary strength – and particularly excelled at driving back uphill!

03 “TALK OF THE TOWN” – AUDI Q5 To kick off an exclusive debut tour of Germany, the Audi Q5 put in a guest appearance at the new Audi terminal in Munich in October 2008. In a new spectacular departure, elaborate holo- gram technology was used to present the sporty SUV in virtual reality to the audience of some 400. The musical highlight of the gala event was a performance by the British funk and soul band Jamiroquai.

* Fuel consumption and emission figures at the end of the Annual Report. 113 Photos: AUDI AG Copy Jürgen Lewandowski Collage Arndt Knieper 1989 1929 1999 1935

1965

1998 1910 1914 1994 198 0

2007 1939

2009

Origins 100 years of Audi 1909 was the year German engineer August Horch created Audi – a Latin translation of his surname, which means “Listen!” One year later, the first Audi rolled off the Zwickau assembly line. An excursion through 100 years of automotive history with models from Audi’s past. The key to their success: Vorsprung durch Technik.

115 19 09 1914 THE BIRTH OF THE AUDI TYPE C AUDI BRAND “I resolved to take part in “Just as I thought, the Su- the competition. I did pervisory Board pinned the everything in my power to blame for our car’s failure 1910 study all the difficulties in- in the Prince Heinrich Tour volved, to ensure that our on me. It was a heated AUDI TYPE A Audi cars would make it meeting. I quickly ended “I was the one who estab- through the next three-year the discussion, left the room, lished the car industry in period.” Convinced by the and stormed out onto the Saxony and took it to new quality of his vehicles and factory yard.” On June 19, heights.” These words re- having taken his Audi to vic- 1909, the brilliant automo- flect the pride with which tory in the 1911 Alpine Run 1929 tive engineer August Horch, August Horch built his vehi- of the K.K. Austrian Auto- who learned his trade from cles. Within a matter of mobile Club, August Horch AUDI TYPE Carl Benz, left the company days of entering his new ventured to take part in the ZWICKAU he had founded, Horch- company Audi Automobil- 1912 to 1914 races with the Gradually, the Golden Werke. By July 16, 1909, he werke mbH on the Commer- new Type C and its 35 hp, Twenties began to lose had set up a new company cial Register on April 25, 3,560 cc four-cylinder their sparkle, and the onset in Zwickau: August Horch 1910, he unveiled the first engine. It was the toughest of the Great Depression Automobilwerke GmbH. To Audi model – the 10/22 hp, reliability test in the world: confronted the automotive his astonishment, his for- also known as the Type A. a distance of well over industry with problems mer company prohibited Its 2,612 cc four-cylinder 2,000 kilometers, including that it simply could not him from continuing to use engine had an output of almost all Alpine passes, in solve. Building luxury vehi- the Horch name. The son of 22 hp at 1,800 rpm, pro- the shortest possible time. cles was a capital-intensive his friend Franz Fikentscher pelling the 830 kilogram Furthermore, lead seals business – one that was only came up with the idea of phaeton to speeds of up to were applied to every vehi- possible with the backing calling it Audi instead – a 75 km/h. Even though cle so that no part could be of major banks. The Dane simple translation of his Horch was a passionate ad- changed and an inspector Jörgen Skafte Rasmussen, surname into Latin. And so vocate of participating in traveled in each car. By who made his fortune with the Audi brand was born. major road reliability tests, 1914, the Type C had three the small DKW models, he didn’t believe the Type A wins to its name. pounced on an initiative was ready for such rigors. by the State Bank of But his employees decided Saxony and, in 1928, Audi to enter the car in the eight- was taken over by DKW. day trials in Sweden in spite Rasmussen believed Audi of this. The Type A won – had a future in the full-size and the Audi legend began. category. From the wreck- age of the collapsed U.S. motor company Ricken- backer, he bought equipment to build six- and eight-cylinder engines. The 5,130 cc, 100 hp eight- cylinder engine was fitted in the Type Zwickau – but who, at that time, could afford to spend 12,950 Reichsmarks on a Pullman limousine? Audi’s next eight-cylinder car didn’t come along until 1988.

116 Origins Vorsprung

1935 AUDI 225 ROADSTER Since the start of the 1930s, Auto Union AG was a multi- brand group, under whose umbrella DKW, Wanderer, Horch and Audi were each given precisely defined roles. Audi was the brand 19 65 for the upscale midsize category, targeting cus- AUDI 72 tomers drawn to techni- 1939 By the mid-1960s, the two- cally avant-garde solutions. stroke era was drawing to It therefore comes as no AUDI TYPE 920 a close at Auto Union and surprise that this brand Audi has earned a reputa- a new era was dawning in adopted front-wheel drive. tion as being a brand suited Ingolstadt, when Head of 1935 saw the introduction to technically discerning Development Ludwig Kraus 198 0 of an enhanced version of customers looking for brought a new four-cylin- the Audi Front, designated products that are truly spe- der, four-stroke engine able AUDI QUATTRO the Audi Front 225, with its cial. Some of the innova- to pull 72 hp out of 1,696 cc Rarely has a new technol- engine capacity increased tions securing this reputa- into production. This en- ogy had such a radical influ- from 1,950 cc to 2,257 cc. tion are the Audi Front, gine, which had an excep- ence on developments in It was a model that ap- launched in 1933, the 225 tionally high compression the auto industry as the pealed to both esthetes series, introduced in 1935, ratio, was destined to secure quattro, unveiled during and individualists alike. and the ultramodern Auto Union’s future. The the Geneva Motor Show in The rarest model of all was 3.2 liter straight-six engine first post-war Audi rolled 1980. “That’s the car we the Special Roadster, which that achieved 75 hp at off the production line on forgot to build,” said flab- was actually intended as 3,000 rpm. This engine was August 13, 1965 in Ingol- bergasted competitors an attention-getter for an developed by Audi’s exclu- stadt and went on sale at when the quattro streaked auto show and cost the sive sister brand Horch for a price of 7,690 German away from its challengers princely sum of 8,500 a “compact” Horch model marks. It was later desig- in its very first outing at Reichsmarks – a luxury only and made its way into the nated “72” to denote the the World Rally Champion- two customers could afford. product range as the Audi number of horsepower. ship. A hollow shaft with Type 920. With this en- center differential in the gine’s 75 horsepower, the manual transmission dis- exclusive sedan and elegant tributed the engine’s power convertible were capable of to all four wheels. The eye- 130 km/h. And since the catching quattro coupe was Type 920’s comfortable universally impressive; specifications also meant whether on ice or snow, dry it had to be heavier, the last roads or wet. It demolished pre-war Audi reverted to its rivals in rally competi- rear-wheel drive. Sales tions and captured its first started well – but then war Constructors World Cham- broke out and only 1,281 of pionship in 1982. this model were ever built. Under the then Technical Director Ferdinand Piëch, Audi wrote a new chapter in technical history.

117 1994 1999 AUDI A8 AUDI A2 Scarcely any other car-maker In hindsight, the A2 and its has made as many advances radical approach to econo- in the areas of image, ac- my and ecology probably ceptance and technology arrived on the market too 1989 leadership as Audi has over early. In building the A2, the past two decades. It Audi demonstrated its AUDI 100 TDI therefore came as no sur- expertise by building a Direct-injection diesel en- prise when, in 1994, the compact car – of just 3.76 gines are among the most company also decided to meters long – with superb efficient internal combus- equip its first luxury sedan 199 8 technology and high stan- tion engines available. The with progressive technology. dards of active and passive company adopted this Not only did it include a safety. It also had the same technology in volume pro- 4.2 liter V8/300 hp engine 199 8 type of aluminum body duction in 1989, when it and quattro drive as stan- featured on the A8 and a launched the first refined dard, it also made the AUDI TT drag coefficient of just direct-injection diesel widest possible use of alu- The Audi TT Coupé study car 0.28. With its 1.2 liter TDI engine for the Audi 100. minum. The body structure was first shown at the In- engine, a further reduced The 2,460 cc turbocharged consisted of a positive- ternational Motor Show in drag coefficient of 0.25 and straight-five had an output locking, high-strength alu- Frankfurt (IAA) in Septem- other measures to optimize of 120 hp, propelling the minum frame structure ber 1995, and the TT Road- fuel efficiency, the A2 car up to a top speed of that supported aluminum ster study captivated the earned a place in history as 200 km/h. The average panels: the patented Audi public at the Tokyo Motor one of the first genuine standard fuel consumption Space Frame. The chassis Show a month later. Jour- “three-liter” (referring to was an impressive 5.7 liters was also made of aluminum, nalists and customers alike fuel consumption per 100 of diesel fuel per 100 kilo- producing a substantial unanimously insisted that kilometers) cars. But there meters. With its direct- weight saving compared to the Coupé and Roadster – was a price to pay for all injection concept and an a conventional vehicle. names reminiscent of the this technology, and it was outstanding drag coeffi- memorable sporty NSU TT ahead of its time. When cient, Audi had yet again models of the 1960s – go the last A2 rolled off the supplied impressive proof into production. Volume production line in June 2005, of its slogan “Vorsprung production started in 1998. a total of 170,000 units durch Technik.” Customers were especially had been built. attracted by the study car’s original shape, which was retained for the production model.

118 Origins Vorsprung

2007 2009 AUDI R8 LOOKING AHEAD Audi has certainly designed The Audi brand will continue and built quite a few excep- to unveil exciting auto- tional sports cars over the motive ideas in 2009 and years. For instance the push ahead with its model quattro, which dominated initiative. The brand’s cen- the World Rally Champi- tenary year will see numer- THE BIRTH OF THE FOUR RINGS onship. Other study cars, ous new models launched In the late 1920s, the German automotive indus- like the Avus and the quat- and new niches filled. The try underwent radical change: The pressure to ra- tro spyder, provided a A5 family will be extended, tionalize, create new products and finance sales glimpse of the expertise with the Cabriolet joining required large amounts of capital, which could available in Ingolstadt. the Coupé, which was suc- only be raised with the support of strong banks. But it wasn’t until Septem- cessfully launched in 2007. The same was true for all carmakers in Saxony. When the State Bank of Saxony decided to merge ber 2003 that Audi created The A5 Sportback, yet an- all the leading local vehicle manufacturers, it the Le Mans study, which other A5 version with dis- gave birth to Auto Union. The receiving company former design chief Walter tinctive design and remark- – already largely financed by the State Bank – was de Silva described as a driv- able functional appeal, will to be Zschopauer Motorenwerke AG, which man- ing machine that “com- appear in the second half ufactured DKW motor vehicles and had already bined the experience of of the year. A new model is acquired the Zwickau-based Audiwerke AG in motor racing triumphs with also being added to the A4 1928. The other companies in the consolidation were Horchwerke AG, Zwickau and the Automo- pioneering design and car line: an A4 allroad tive Division of Wanderer Werke AG, based in Audi’s technological ex- quattro to follow in the Chemnitz. The merger was finalized on June 29, pertise.” Three years later, footsteps of the hugely suc- 1932 and took place retroactively as of Novem- in September 2006, the cessful A6 allroad quattro. ber 1, 1931. The initial equity capital of study had matured into the Sports cars are another 14.5 million Reichsmarks eventually rose to R8 production model and focus of Audi’s model initia- 30 million Reichsmarks and was almost com- made its first appearance tive. During the Detroit Auto pletely owned by the State Bank of Saxony. And so Auto Union AG in Chemnitz was founded. at the Paris Motor Show. Show at the start of the With an initial annual income of 65 million The “thoroughbred sports year, Audi unveiled its 386 Reichsmarks, 8,000 employees, and a large pro- car with the functionality kW (525 hp) R8 V10. And a portion of vehicle registrations, it became Ger- of an Audi” has delighted new top-of-the-line TT many’s second-largest automobile concern. The customers since 2007. model celebrated its debut Group preserved the legacy brands Audi, DKW, at the Geneva Motor Show: Horch and Wanderer and their unity found sym- The successful TT is now bolic expression in the four interlocking rings, which to this day remain the symbol for Audi. available as an RS version.* Auto Union, newly established as a limited liability company (GmbH) in Ingolstadt in 1949, and NSU Motorenwerke AG, Neckarsulm, ultimately merged in 1985 to form AUDI AG.

Jürgen Lewandowski has devoted decades to researching automotive history and has documented the evolution of the Audi brand in several books.

Engine sounds from 100 years of automotive history can be found on a CD at the end of the Annual Report.

* Fuel consumption and emission figures at the end of the Annual Report. 119 Photos: AUDI AG Foresight Opportunities in crisis Audi CFO Axel Strotbek met with Max Otte, the economist who predicted the global crash back in 2006 and who now hopes for clear and better regulations on global economic activities. Something everyone would profit from.

Interview Olaf Wittrock potential hazards that it was ultimately impossible to say Photo Dieter Mayr what really prompted the collapse. But the behavior of central banks certainly played a part. By flooding the mar- e are engulfed in a financial crisis and are kets with cheap money, they ultimately left us with no risk bombarded daily with alarming reports premium to help us differentiate between risky and less Wabout how bad things could still get. So it’s risky credit. Once the first risky loans fall due or turn toxic, high time to call on the experts for an assessment of there is no way to stop it. the situation. Professor Max Otte saw the collapse coming. When you wrote “The crash is coming” two years ago, Mr. Strotbek, as AUDI AG’s CFO, have you ever experienced what were the warning signs? a particular moment where you thought: We’re about to Max Otte: Well, my basic observation was that a nation’s be hit by a crisis? economy, just like a business, becomes overleveraged if it Axel Strotbek: Well, Europe had long been suspicious and takes on too much debt. And we had reached a point where critical of the United States’ over-indebtedness and access total U.S. debt was almost 400 percent of its gross domes- to cheap money. But there’s no doubt most of us here were tic product. Such a house of cards is eventually going to taken aback by the severity and speed of the crash. I think come tumbling down. If the financial sector gets to be too we’re a long way away from having fully digested the situa- big, the real economy can no longer sustain it. tion – in fact, we’re only just beginning to do so. There is still a lack of transparency and perception of how the rules For many years, the drastic expansion of the global eco- of the game have changed. nomy and the resulting rise in demand cushioned the growing amount of debt. So what prompted the bubble When you consider that many companies are looking a lot to burst? shakier than the Audi Group, might you even be one of the Otte: I would dispute the claim that there was ever a winners of this crisis? strong growth in demand. It is often said that U.S. con- Strotbek: Thanks to our youthful, attractive model range, sumers are the driving force of global capitalism. The U.S. we succeeded in posting outstanding results in 2008. But we economy absorbed a great many surpluses; after all, in have always tried to stress that we don’t exist in some is- recent times it has been soaking up two-thirds of global land paradise. And with the overall markets slumping in some savings. There was such an accumulation of debt-financed cases by more than 25 percent, we are bound to be drawn

120 Summit talks: Axel Strotbek (left) and Max Otte believe entrepreneurial action is the way out of the crisis.

121 Vorsprung Foresight

in as well. 2009 is going to be an extremely hard year, but “I think we’ll see a return to the old I’m very confident that, thanks to our efficient, emotion- principles of the reputable merchant packed vehicles and modern engines, we’ll fare much who assesses his risks realistically better than markets as a whole. And we will keep up our and doesn’t get involved in things he product initiative. doesn’t understand.” Prof. Max Otte, economist Mr. Otte, are there ever winners in such crises? It feels more like everything is going downhill. Otte: Of course every crisis has its winners and losers. Be- Though, of course, the car industry is not entirely blame- cause whenever there is a downturn in economic activity less for the orgies of debt we have seen in the United as a whole and things are allowed to follow their normal States in recent years, complete with price wars, zero course, the strongest companies in the industry automati- interest loans and so on. It makes me wonder whether it cally come out the winners. They don’t have to focus as wouldn’t be better to introduce sensible legislative con- much on prices and are equipped for the long haul. The ex- trols to ensure that loans are granted under fair condi- act opposite is true for weaker companies, who fare partic- tions, rather than as a hidden discount. It would be won- ularly badly during a crisis. derful if the state could emerge from this crisis with greater authority – as a referee who ensures that the But it also sounded as though some companies might regulations are actually complied with. not be able to pull through the crisis on their own. That’s when people are quick to call on the state to intervene. The three big U.S. carmakers are facing enormous difficul- Is that attitude healthy or rather more dangerous, ties and the public’s perception is that this had a lot to do Mr. Strotbek? with the financial crisis. But isn’t there actually a different Strotbek: In principle, I prefer the idea of self-regulating, cause of these structural problems in the car sector? self-healing markets. For instance, our company does not Strotbek: I believe the structural challenge that the car in- need any subsidies or bailouts. As in the past, we will be dustry is facing is an entirely separate issue to what is cur- able to finance our capital investment ourselves. But in a rently happening. The question of how structures need to global industry, it’s always important to monitor global be changed in the medium and long term should be con- competitive trends and respond if we see any signs of un- sidered independently of the present upheaval. As to the fair competition. Regional subsidies in other manufactur- United States, it is a very distinct market that applies dif- ing countries could adversely affect our competitiveness, ferent standards of viability and competitiveness. Ever and thus have an indirect impact on employment in Europe. since the early 1990s, its domestic industry has been under So imposing conditions on injections of capital into the attack by foreign manufacturers, e.g. from Japan, who European auto industry – e.g. to fund future technologies – entered the market with locally built products. So the fun- undoubtedly makes sense and may even be essential. damental weakness of certain major carmakers has been evident for many years, if not decades, in the form of The German car manufacturers’ banks have just tried to ob- dwindling market shares. tain such state aid. Is that part of such an emergency plan? Strotbek: The financial crisis has led to a complete break- To what extent is the current crisis affecting Audi’s busi- down of trust between banks. That trust now needs to be ness in the United States? restored through support measures made available for a Strotbek: A direct consequence of economic uncertainty is limited period. We’re not asking for any kind of equity in- restraint among buyers; overall demand has dropped by jection or state funding; we merely want individual guaran- almost 20 percent and nobody knows how much further it tees so that we can resume refinancing under sensible is going to fall. On the other hand, we have a growing prod- conditions. In the end, our customers benefit because we uct range and new technologies that offer us enormous will be able to offer attractive terms based on competitive potential to develop in the medium term. So even though leasing and financial arrangements, which in turn will part of me deeply regrets what is happening on the U.S. boost demand and, ultimately, the economy as a whole. market, I also see how it is creating opportunities for the Otte: I think that is also part of the emergency plan. Audi brand in the years ahead.

122 MOVING DISCUSSION A video clip of the interview can be found at: www.audi.com/ar2008/foresight

But, all in all, the industry is in the throes of radical confident that we will find the right answers and pull through transformation. the crisis with future-proof products and technologies. Otte: Absolutely. The automotive industry encapsulates all the problems and opportunities that are part and parcel of Can investing actively and being highly entrepreneurial modern business life. On the one hand, it is a mature in- during the current crisis have a particularly positive effect, dustry making an indisputable bulk commodity that domi- Mr. Otte? nates our economic life, but with little room for market Otte: It has to! Entrepreneurial activity is of fundamental growth because, at some point, people simply don’t have importance to the economy’s development. In mature in- space for yet another car in their garage. On the other dustries, in particular, you often find that one company hand, it has a long way to go in terms of sustainability: copies another; in other words, if one player does some- Energy efficiency and this very idea of sustainability are the thing, the others follow suit. And this can hamper innova- two major growth areas that will give fresh impetus even tive solutions. However, when Mr. Strotbek talks about to this mature industry. having to choose between cutting costs and investing when setting priorities, he is referring to key business decisions. You simply can’t do everything all at once, otherwise you “2009 is going to be an extremely just get bogged down. That’s why a company can provide hard year, but I’m very confident impetus by establishing a trend in a particular direction. that, thanks to our youthful model When I take a look at the Audi Group’s 10-year figures and range, we’ll fare much better than see a doubling of vehicle sales along with over 60 percent markets as a whole.” growth for the core brand, then I can see it has succeeded Axel Strotbek, Member of the Board of Management for in doing this. And, of course, that also creates very ambi- Finance and Organization, AUDI AG tious targets for the future.

Although sustainability has been strongly overshadowed Mr. Otte, you saw the crash coming – are you also able to by the financial crisis in recent months, it has actually predict when we will come out the other side? been the industry’s defining issue with regard to its struc- Otte: It would be nice if I could. But it is easier to recog- ture. To what extent can energy efficiency provide a solu- nize that a bridge is going to collapse under an excessive tion to the current situation, Mr. Strotbek? load than to know when reconstruction will be finished. Strotbek: I think it offers huge opportunities because the I think we are going to experience a sharp recession first. ideas we currently have in the pipeline focus very specifi- I can’t yet exclude the possibility of a really bad ending, cally on the type of structural change Professor Otte has but I hope that the danger has been averted thanks to the just described. It is one of our greatest strengths that we rescue measures that governments have taken. Amid the have continued to invest and step up the pace in this area – crisis, I must say I am very pleased with the way politicians ensuring that tomorrow and in the future we will continue have responded to the need for firefighting measures. to bring products to market that convince through “Vor- This certainly couldn’t be taken for granted. We will have sprung durch Technik.” to wait and see whether better regulation will now follow.

So does that put you in the role of hunter or hunted? The So ultimately, you hope we will learn from our mistakes? impression in recent years has often been that European Otte: Of course. I think we’ll see a return to the old princi- manufacturers as a whole have not exactly been taking the ples of the reputable merchant who assesses his risks real- leading role. istically and doesn’t get involved in things he doesn’t un- Strotbek: Speaking for Audi, I think it is fair to say that derstand. If we manage to lay down some simple, clear after a 13th successive record-breaking year, our brand is in rules for the banks and are generally able to behave more the “hunted” role. But there’s no such thing as a free lunch, responsibly, we’ll have moved forward. and the challenge we now face is using convincing technologies to build on this position. The question we are cur- The business journalist Olaf Wittrock works for Frankfurter All- rently addressing is therefore where to place our priorities, gemeine Zeitung, Financial Times Deutschland and Handelsblatt, and where to rein in capital investment and costs. I am very among others.

123 //////// VORSPRUNG FOR ALL ETERNITY //////////////////////////////////////////////////////////////////////////////

TDI In creating the first passenger-car diesel engine with fully electric direct injection 198 0 and turbocharging in 1989, AUDI AG paved quattro the way for today’s The idea of spreading efficient diesel en- the propulsive power gines. TDI technology across all four wheels so has since taken to as to decisively improve the road more than traction and cornering 4.8 million times. behavior has become a legend in its own time – both on the open road and in motor racing. Since 1980, some three million Audi models have been equipped 1989 with quattro permanent all-wheel drive. Today, almost one in three Audi vehicles is ordered with quattro drive. 1994

AUDI SPACE FRAME The A8 arrives on the market – the first production car to feature the revolutionary lightweight Audi Space Frame, reducing its weight by some 140 kilograms com- 1996 pared with a conventional sheet steel body.

PRODUCTION HYBRID MODEL AUDI DUO III The Audi brand is a pioneer in hybrid research, unveiling the Audi duo hybrid model with integral electric motor as far back as 1989. The Audi duo III, Europe’s first 2008 production hybrid vehicle, followed in 1996.

EFFICIENCY A production version of the Audi A4 2.0 TDI* covered 1,650 kilometers without refueling. This amounted to an average fuel consumption of 3.32 liters of diesel per 100 kilometers.

124 * Fuel consumption and emission figures at the end of the Annual Report. 44gb_GB08_Global_Stories_130x210 16.02.2009 16:19 Uhr Seite 1

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MADELEINE THIEN Montreal Mile End

MATT RUBINSTEIN Sydney The Secret Heart

HENRIETTA ROSE-INNES Cape Town The Other Safari

Three award-winning young authors describe in three uniquely individual short stories what makes their cities so special. 44gb_GB08_Global_Stories_130x210 16.02.2009 16:19 Uhr Seite 2

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Montreal Mile End

In the early morning, when the streets are bare and still, I walk past Ren’s apart- ment. This ritual is now fourteen days old. I choose the right-hand side of the very same roads. Yesterday there was rain. The day before that I felt faint drizzle like a melting of the air. As I walked, I thought I could hear the taps being turned on, I could smell coffee grinds. I could hear dreams pacing restlessly across the hardwood floors. I’m nearly blind now but I know well enough the streets I’m walking through. Here on Clark, metal staircases spiral up to meet the second and the third storeys. Balconies perch like little shelves, lost behind the spindly trees. The leaves are crimson and orange, in my mind they seem to me like after- images, hanging on after the light itself has burned out. Last year, my opthamologist told me that all sight is a creation, we take what the stream of light gives us when it touches the nerve cells of the retina, when it pulses its way from the optic nerve to the visual cortex. We gather up all the information contained therein and we read it as best we can. So, each night for the last fourteen nights, I’ve lain in bed and created my own pictures: Ren in her high heels winding her way up the staircase, Ren in the day-to-day morning ritual of opening the curtains and letting the sky in. I imagine the city in superb detail and when I open my eyes I want the city to look back at me, to meet me halfway. Instead what I see is the great empty centre of the room pinning me down, a black centre haloed by fraying edges. Over at the Y on Park Avenue, I’ve been exercising on the treadmill. I keep my eyes wide open as I stride boldly into the darkness. Freedom comes in such small spoonfuls, measured out like summer days in Montreal. It’s been twenty-two years since Ren left me, left Vancouver and came here to Montreal, came home. All I can say when I call her is, Can you come and see me one more time?

Twenty-two years ago she stirred her coffee and said, I’m irrelevant to your life. She was sitting beside me at our kitchen table, illuminated by the skylight, particles of dust snowing down on us, she was wearing a blouse with a flower-print pattern. Sweetie, I said, but I couldn’t meet her eyes. I’m going home, she told

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me. What is this, I said, puffing myself up, trying to be indignant. She had a lover and I had someone else and we both knew this humiliating fact without either of us having to admit it out loud. She was leaving me. This afternoon I fell asleep on the sofa, the television still on. When I wake it’s already dinnertime and I’m a little bit confused. I wonder if I’ve done it again, fallen asleep in public, in a cafe where talk murmurs around me like the river rolling on beneath a bridge, a cafe where the cardiganed ladies tear off pieces of croissant and the flaky bits rain down onto pristine white napkins but no, the couch envelops me. Light hovers around the windows. The sweet smell of my lunchtime soup, prepared by my daughter, is still strong in the air.

I close my eyes, breathe deeply and open my eyes again. To be back in Montreal is a strange thing. The other day, I tripped while going up the stairs of the Church of St. Michael and St. Anthony. When I was a boy growing up in Mile End, I used to study the disjointed architecture – equal parts rectangle, crescent moon, and pointing finger – I tried to imagine a way up to the centre of the vast, domical roof because I wanted to see the city without myself being seen. I tripped and my right knee bruised against the same steps that used to hoist me up. In the days when my vision first began to deteriorate, I told myself that the salinity of tears was the answer to the mess inside. I sat in my bed and thought of things I hadn’t considered in years, and I let those slivers fall right through me, Ren rolling away from me when I came to bed. Me leaving a woman in the middle of the night, stepping out into the rainy darkness of an alien city, rehears- ing excuses in my head. I remember going blind, a memory as shorn and shaven as the first time I undid Renny’s blouse, or the last shouting match I had with my father. Tears contain some sort of painkiller. Would crying for three weeks be the equivalent of a cleansing fast? Outside my kitchen, life is rich and fluent. A squirrel runs along my terrace like a madman, ripping things up. I can hear him but not see him. Once, when I was a child, I saw a squirrel racing down Clark Street, a croissant between his teeth, I chased this squirrel until he spiraled up into a tree and hid his fat tail among the burnished leaves. My grandmother said, Why can’t you leave the world alone? It’s not difficult to fool people. I walk much slower now and people think my knees are giving out. I stopped driving and relied on taxis and when that got

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too expensive, I took the bus. They’re big and fairly unmissable. But eventually, I couldn’t read a newspaper, a book, a computer screen, a letter, a menu. I could- n’t actually read the words macular degeneration, couldn’t see my own diagnosis. I asked myself, who is doing this to me? I felt cold everywhere, cold in my chest, cold in my stomach. I realized I had seen my last clear image of the world, it was retreating moment by moment. Standing in a parking lot that day, I put my hands out to steady myself. Someone was blotting out the world, dab by dab, with a little grey tissue. I lifted my hands to stop them but they just kept coming, an army of caves. I covered my eyes. The next morning I flew home to Montreal.

On est au milieu de nulle part, I told Ren on the day she left me. Here I am at the staircase. Evening light around me and a warm wind that stirs the trees. A couple walks past, whispering to one another. In my mind’s eye, I see their fingertips brushing, their hatted heads bowed together. I hear the clicking paws and huff- ing breath of a little dog, the crunching of a paper bag, I smell warm bread. A chair creaks on a nearby balcony and a man pulls a child away from a display window, and the child cries out in soft, bereft French. I nudge my shoe out and find the bottom step, swim my hand tentatively through the air until the iron handrail folds itself into my fingers. I shuffle up. To- morrow I will get a cane but today I want to be someone else. The air smells of dry leaves. Up and down the street, there’s life and movement, like when I was a boy and I used to sit on the curb and watch the cars rush by. All the foreign languages ran out of all the windows, deafening, like they were begging the world to listen up, to take notice, newcomers like city birds who chirp harder to out-sing the traffic. Bicycles whirr by and a cheer goes up from a sports bar down the street. Maybe there’s a thick-necked guy running up the ice now, waving his stick in the air. I can hear pint glasses slammed down on a beer-smeared table. Step by step, so different from when I used to imagine running up this staircase, slamming my fist against Ren’s door. Sometimes I imagined bursting in, and all the rage and guilt I felt would flood the sunny walls and on her face I’d see regret and love and maybe even fear. Was that me? The person I was twenty- two years ago, does he still belong to me and I to him? So here I am and I can see the door. It has a black hole in the middle and it’s pulling me into it. The sound of my knocking is confident. And Renny’s face when she appears falls into the same darkness, haloed by the frayed edges, and I know that I waited too long.

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The insistent city wind finds its way between the folds of my knotted scarf. I want to touch the stones of the building and reassure myself these are the same stones I used to lean against and write upon, that the city keeps everything I’ve long forgotten. How’s Sanjay, I ask. I know that her face is falling. Oh, haven’t you heard? she says. I have heard but I want to hear her say it out loud. She says, I left him. You left him, too? I ask. Him too, she says. She asks me why I’m looking at her like that and I say, Just thinking. Think- ing what? I can’t find the words to tell her that I don’t understand how the after- images can burn so persistently, but I’m starting to forget what my own face looks like and can she imagine, just imagine, what that’s like? It’s snowing, I say. It’s not snowing, she says. Around me, Montreal is disappearing and growing louder and because I can’t see it, I feel like I’m losing myself within it. You okay? she asks. Her voice is the same, only lower, only slower, and there’s a catch in it like a needle pulling thread. What do you see? I ask her. There’s a strangeness between us like the distance between two houses. That’s a nice shirt, she says, and that makes me smile. Come in, she says, embarrassed, nervous. Or aren’t you staying? On est au milieu de nulle part, I had told her callously. In the middle of nowhere, she had said, at least you can see a goddamn thing. Now Renny takes my hand and pulls me nearer. My god, she says, what’s wrong? Why are you looking at me like that? Her voice wavers like a held note against my skin. When we were young, she used to hold my face in both her hands so that she could kiss me in her soft and hopeful and lingering way. When she speaks now, a clutch of memories come raging through but the dark stays dark, the shades stay drawn. At this last possible moment, I’m falling short and I want to turn and run back down the stairs, run to the Old Port where I can throw my vi- sions into the ice-flecked water. At my age, eyes fail, it’s the way of things. I’ve changed, I tell her, but I don’t know how to tell her all the ways and all the means. We all want to, she says, and she opens the door a little bit wider.

End

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Madeleine Thien, 34, a Canadian of Malaysian-Chinese descent, first studied dance before switching to literature. Her very first collection of stories, “Simple Recipes,” won four Canadian literary awards. Her first novel, “Certainty,” has also won several awards and has been translated into 15 languages. Madeleine Thien lives in Montreal.

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Sydney The Secret Heart

It came in an internal envelope, the kind that’s scrawled with names and depart- ments, everywhere it’s been. Someone brought it from reception to my office on the top floor. This is the newest tower in the city, and one of the tallest: if I look out I can see the sparkling puzzle of the harbour, its bays and beaches, all the way to the Heads and the ocean beyond. But I’m not looking out. I’m looking at the note. We have your wife. She is hidden deep in the city’s most secret heart; you cannot find her. You have until dawn to come up with the money. Now, I’m not the kind of person you would expect to receive a ransom note. I have some money, but I didn’t make it in any flashy way. I made it slowly and assiduously, month by month. I’m not prepared for this at all. And there are a number of things about the note that strike me as peculiar. It asks for money but not for any particular amount. It’s worded very strangely. The city’s most secret heart? It’s almost poetic. I don’t know who would write a ransom note like that. It threatens my wife, but I don’t have a wife. I used to have one, but I haven’t seen her or spo- ken to her in almost ten years. And the note’s in her handwriting. It’s a shock to see her careful script after all this time, but there’s no mis- taking it. She copied it from a typewriter, you can tell by the ‘g’. And it’s eerie to read these threats that she’s been forced to write about herself, as if she were someone else. The whole thing feels like a dream. From up here I can see the currents in the harbour, marked by the reflections of the light. I can see where the surface has been smoothed by a tanker or a cruise ship. The sailboats scattered like breadcrumbs on the water, and the proud spires stretching skyward. This is a city that has risen from the landscape, its greens and blues, its sand fused to glass. It’s a city without a secret heart. Aggie knew that better than anybody. She was always trying to find out what the city was hiding. She wasn’t happy with its dazzling surfaces, its natural and invented beauty: she wanted to go deeper. But beneath the surface there was only another surface. So she would have laughed when they made her write those words. Or she would have de- spaired, knowing they were holding her in a place that didn’t exist. And it’s the

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thought of her despair that tightens my chest, even after all the years. I know I have to find her.

Sydney is a city of ancient unmarked pathways that became dusty tracks lined with canvas and jute and soon a confusion of lanes and alleys, passages and courtyards, easements and rights of way. But that was a long time ago. Govern- ment and commerce have taken every chance to align the city, to fill in its voids. Now instead of poky alleys we have great plazas and squares; instead of trenches, fountains; instead of darkness, air and light. I hurry from block to stretching block and pass only a handful of stubby lanes ending with skips and air conditioners. It’s only in the oldest part of the city that the skyscrapers run out, you suddenly feel taller. Here are tiny terrace houses in brick and local sandstone, old churches and even older pubs. There are blind alleys between and behind the buildings, narrow lanes zagging through the stone. In the northwest corner of the headland, shadowed from the late-morning sun, is an empty park with swings and a slide. Aggie and I used to explore this part of the city together, looking for places we didn’t know, even though we’d lived here all our lives. The worn stone steps leading down to the old finger wharfs, the back rooms and cellars of the city’s first hotels, even the cast-iron public conveniences used to delight us back then. We were married too young, and then we were divorced too young. We were hoping against all wisdom that two wrongs could make a right. There’s nobody here in the leeward side: not my ex-wife, not anyone. And so I turn and climb the observatory hill, I look up to the city’s towers and down to its mighty foundations, and I descend towards its possible, its hopeful heart. The old lanes and alleys weren’t really destroyed, they were sunk below the streets. Many of the towers and the underground stations are connected by tunnels that stretch for kilometres, north to south, east to west, lined with tiny shops of the kind that used to crowd the surface. Tobacconists and barbers, shoe shiners and key cutters, seamstresses and thread merchants and hawkers. Aggie and I would meet down here for lunch, long ago; we were working in law offices at opposite ends of the tunnels, and it was always a thrill to take the lift to the basement and meet her in some hidden café halfway between our buildings. We were often the only ones there, we’d sit on mismatched chairs and stay much longer than our lunch hours.

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It’s strange to remember all these things. For so many years I’ve only been able to think of the way our relationship ended, the shouting and then the silence. But now as I hurry past the old sandwich shop, the vegetarian place that serves pork, I can feel something softening inside me. There are more takeaway chains than there used to be down here, but a surprising number of the old places are still the same. For a moment I’ve forgotten about the kidnappers and the ransom note. Every time I turn a corner I expect to see her, not bound and gagged but sitting at one of the wobbly tables, tapping her watch because I’m late. I feel a different, deeper kind of urgency as I stride and then run through the underground walk- ways, all but pushing people aside. I know there are more shafts and burrows than these. The whole city was built around a freshwater stream that still flows through conduits of steel and stone between the foundations and basement car parks. There are railway tunnels begun and never finished; over the years they’ve been used as air-raid shelters and war rooms, and in one of them a great sub- terranean lake has gathered from the city’s runoffs and overflows. Aggie and I used to talk about going down there, but we ran out of pa- tience, we ran out of time. Is she there now, at last? I follow the course of the Tank Stream in the names of the streets and the marks on the pavement, but I can’t find any way in. I poke around the train platforms, but they’re all patrolled by cameras and security guards, nobody could have taken her there.

As night falls, the city empties of people and fills with shadows. I walk quickly but erratically, I don’t have a plan. All I can think is that dawn will come and I’ll never see her again. This morning I never wanted to, but now – well, now I’m not so sure. I buy a coffee from the all-night diner at Circular Quay. There’s nobody around, just me and the moon and the moon’s reflection. We used to catch the last ferries out and back, kissing on the top decks, singing into the wind. We told each other our most terrible secrets, our most wonderful secrets. My legs ache from all my crossings, and I’m strung out on coffee and worry. But a kind of peace settles over me, it seems to rise from the rhythmic wash of the tide against the quay. It’s a kind of peace and a kind of clarity. I know, for example, that there probably weren’t any kidnappers, the ransom note was from Aggie alone. The secret heart was her idea. I don’t think she wanted me to find her, she just wanted me to remember what we’d both forgotten. She wanted to teach me a lesson.

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It’s typical of her. She was always trying to educate me, to make me more suitable. And now she wants to show me what a waste it’s all been, all these bitter years. As if I didn’t know that already. As if I haven’t known it all along. Now I’m angry all over again, and I can’t stand the thought of never seeing her again. It’s four in the morning and I don’t know what to do with myself. I’ll just get it over with as quickly as possible. The botanic gardens are locked up for the night but I can still follow the road along the eastern ridge of Mrs Macquarie’s Point where it overlooks Woolloomooloo Bay, then the harbour, then the curving horizon. I sit under a fig tree and wait for the dawn like a doomed prisoner. I’m still wearing my second favourite suit.

The dawn is as beautiful as always. The night pales almost imperceptibly until the sun appears over the headlands to the east. The harbour glows a rosy pink; it looks like a rock garden freshly raked. I’ll walk back to work, drink some more coffee and carry on as if none of this ever happened. I’ve been unhappy for ten years, I can keep it up a bit longer. At the very edge of the point is a seat carved into the sandstone for Elizabeth Macquarie, the second wife of the fifth governor of New South Wales. From here you can see the whole harbour, from the Bridge and the Opera House in the west to the island Ford Denison and the Heads in the east, glowing with the morning sun. It’s one of Sydney’s most famous attractions, with hundreds or thousands of visitors each day. And Aggie is sitting there, tapping her watch because I’m late. For a moment I can’t believe my eyes, and then I’m overcome by rage. “This isn’t a secret!” I shout at her, crazily. “What the hell are you talking about?” I can’t help noticing that she still looks beautiful, her sharp features slightly softened, her pixie haircut dyed a little brighter. She’s changed about as much as I have, in some ways a lot, in others not at all. “Don’t you remember?” she says. “We sat here together, quite by accident, a few weeks before we met for the first time.” Of course I remember, but I can’t admit it to her. “Thousands of people come here every day,” I insist. “It’s in all the guidebooks. Everybody knows about it.” “No, they don’t,” she says. “Not what we know.” For the first time I notice how hopeful she looks. Her face looks like it’s about to split into a smile of the most blinding sunshine. I feel like I’ve been tricked, she’s got me on a lawyer’s technicality. I summon my objections, but I find I can’t say anything. And now her face reveals its smile, and

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it’s as dazzling as the waking city behind her. “Do you want to get some break- fast?” she says. “I have to go to work,” I say. “I’ve been missing almost twenty- four hours.” Her face falls, and I know that something’s about to happen. “But I’ll meet you for lunch,” I add. My smile reflects hers, as the harbour reflects the sun and the city, its hidden surfaces, its famous secrets, its countless hearts.

End

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Matt Rubinstein, 35, was born in Sydney and lives there again today. After years as an attorney, he decided to devote himself fully to writing. His debut, a novel in sonnet form, made him a celebrated writer in Australia overnight. A scriptwriter as well, Matt Rubinstein also writes short films and stage adaptations.

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Cape Town The Other Safari

First time in Cape Town? Ah, Madam, Sir – you’re in for a treat. Business or pleasure? Leave me alone, you say, pushing past impatiently – I’ve seen the sights, done the attractions: the golden beaches, the balmy Indian Ocean and the brisk Atlantic, all laid out under the flat-topped mountain; the taste of summer wine, the splash of a whale’s tail ... shark-diving, rock-climbing, township taverns, even Mandela’s prison cell. Been there, got the T-shirt. But Sir, Madam – wait. You haven’t seen it all! There’s another Cape Town, one that exists inside, alongside the one in the brochures. It smells more of the south-easter wind than it does of sunscreen and martinis, and it’s hard to fit on a postcard. Fortunately for you, dear visitor, I do a tour – especially designed to meet your needs and requirements. There’ll be no gorgeous sunsets over the silver bay, no lions hiding in the bush. But I’ll point out the cloudscape behind your back; I’ll coax a seagull to sit on your shoulder; I’ll buy you a slightly battered arum lily, smuggled off the mountain and sold out of a plastic bucket by a woman at the side of the road. It’s going to be great. So roll up, roll up, as they say: join the other Cape Town tour. Let’s call it a safari; but the creatures you meet won’t be giraffes and elephants. We’ll start in a random corner of the town and stroll through its less travelled streets, stopping to observe the changing light, the ground at our feet, the shapes disappearing in the shadows around the next corner. And we’ll end up back where we started – under the shadow of the mountain, in sniffing distance of two seas, gazing at the sky. So, sightseers, are we all together? Try not to wander off.

Let us begin by casting our eyes to the heavens. It’s customary to stare at Table Mountain. In fact, it’s hard to get away from the thing; it’s always on the horizon, trapping the gaze. And once you’ve looked, it’s almost impossible to look away. But let’s try. Drag your eyes away from those elegantly terraced cliffs and slopes, and move a little sideways, towards the less imposing Lion’s Head – which is a lion only by a considerable stretch of the imagination, a sort of dachshund if truth be told.

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We are not alone here. Let’s greet the imam, crisp in flowing white, on his way up to the green-and-white kramat, the holy tomb that balances on the Lion’s spine; and let’s offer our water and energy bars to these brisk and sweaty hiking girls – German tourists, quite possibly – heading down from its cranium. So far, so good. Now let your eye drift upwards. Above the Lion’s shoulders are some of the best skies in the city: dappled with puffs of frosty breath from the southern oceans, shifting from moody pearl to hot porcelain blue at the height of the day, softening to gold at sunset, and then distilling into clear aquamarine, most luminous just before the evening star. Careful, now. It’s lovely, yes, but don’t go too close, don’t try to touch. If we climbed over the Lion’s neck or drove under his muzzle ... well, then we would lose the subtle delights of the sky, because – bam – we’d be hit by the spectacle of the sea on the other side. A gleaming bowl under the bat- tlements of the mountain, cupping a garish sunset, rimmed by decadently long golden beaches scattered with the browning bodies of international models, etc, etc. And we’re back in postcard land. So you there – come away! Let’s keep the group together, shall we? Turn around, turn away from the siren song of the cocktail bars and beach umbrellas, leave the dazzling light.

I see the sea has seduced you, though; so let’s stick with the marine theme. But we’ll head away from the foamy surf and down towards the grittier end of the city: the harbour. No no, not that way! Certainly we won’t dawdle in the glittering aisles of the Waterfront Shopping Centre. You can go there on your own time. Right now we’re entering the working docks, oil-stained and noisy and populated by sailors and gulls and other dubious characters. Breathe in deep the fishy air! And look at those great rusty trawlers that seem like they should never float at all, weighed down to the waterline with piled containers like gigantic kids’ building blocks. Step aside folks, and let this tough-looking crowd pass: a boatload of Taiwanese fishermen, heading out to find a karaoke bar downtown. Don’t you love the way everything is giant-size? Chains with links as thick as thighs; propellers two storeys high; anchors like brutal sculptures; an amphi- theatre of a dry dock. And the noises! Clanks, shouts, grinding, booms! Up close, the oil rigs are roaring, dripping beasts, rusty and monumental, like well-travelled spaceships that have somehow washed ashore in this 17th-century port city. Because this is how Cape Town is: a city of incongruities, its history rubbing up

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against its future, full of people from somewhere else, passing through. Nothing is quite what it appears to be, or exactly where you expect it to be, or doing quite what it was designed to do. Boundaries shift, plans change. A fallen billboard gets pressed into service as the wall of someone’s shack; a mountain sits smack in the city centre; spaceships dock in the harbour. Maybe it’s the wind which muddles things up: the gusty south-easter, which features annually in a front-page photo in the Cape Times, lifting some poor citizen’s skirts as she clings to a lamp-post.

Even the roads and bridges seem blown off course, ending up in odd places. Like scenic Chapman’s Peak Drive, teetering on the very edge of the sea cliffs – every year raining down boulders, every year hopefully repaired. Or the railway line running next to the sea at Kalk Bay, where the waves sometimes spatter the train windows; as you ride you can wave at bare-chested surfers frolicking in the water, or seals looping their sleek bodies through the surf. You might notice, in central Cape Town, the flyover arcing overhead. An impressive ramp of concrete, designed to slingshot cars right across the unsightly harbour-end of the city and on to the cosmopolitan delights of Sea Point. Except something’s missing. There’s two broken-ended halves of a swooping highway – and a great big gap of unused sky in between. If you tried to drive it, you’d swan- dive into the busy intersection below, a long way down. Consider also the main taxi-rank, which is not on the ground as you might expect, but up in the sky, on top of the railway station, where once the trains and platforms were divided into White and Non-white. What used to be an austere concrete rooftop has been transformed into an African marketplace. Fancy a snack, a haircut, a pair of cheap sunglasses? Here, this lushly dreadlocked gentle- man will provide you with obscure medicinal herbs, if you’re feeling queasy; these tall, smooth-talking guys from up north will sell you knock-off Nigerian videos; this trio of voluble mamas have brought their bags of ten-cent sweets all the way from a distant township – for you! These sassy teens in skin-tight jeans will braid your hair or embellish you with extensions; and over there’s an old man selling pots and pans – and machetes too, should you feel the need for personal protection. The taxis congregate here from all over – gunning through the rush-hour traffic, skidding in and out of the fast lane, stopping at will, packed tight with bodies, shuddering with the bone-vibrating sounds of township house. Taxi? Mitchells Plain, Mowbray, Grassy Park? The spry little guy in the baseball cap

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who’s shouting at us now is the gaardjie, the taxi door-operator, money-collector, customer-wrangler, seat-packer and general driver’s sidekick. Shall we grab a ride? Which taxi should we pick – “Mister Lover Man”, “Funky Titanic”, “Rock of Ages”? Jam in, jam in where you can, slide your grubby five-rand coins over to the gaardjie, let’s move! We still have a few more sights to see ... Seeing as this is billed as a safari, no doubt you will not be satisfied with your African Experience if we don’t spot a few real live animals. But nothing as obvious, as mundane as rhino or cheetah. Roaring along the highway, face smeared against the glass of a speeding taxi, you can’t help but note one of Cape Town’s most delightful oddities. Even lifelong Capetonians shake their heads every now and then in disbelief at this pastoral scene. What are those creatures, gambolling on the grassy slope? Zebras? Not quite ... those are quaggas, fantastic experimental beasts from the past. They’re hybrids, the products of a breeding project to recreate an extinct sub-species. In spitting distance of rush-hour traffic, they browse and twitch their pale rumps, coyly naked where one would expect conventional zebra stripes. Less exotic, but to my mind more fully citizens of the city, are the birds: those specialists of antigravity and upside-down worlds, those connoisseurs of sudden reversals of wind. They thrive here. We have immigrant birds, refugees from up north, like the hadedas with their mad mocking haa-haaah cry; or the sweetly pair-bonded Egyptian geese that are everywhere now – in the forest, on the beach, on top of five-storey buildings, balancing their plump bodies on the tips of lamp-posts all over town. Like any city, we also have our disreputable street pigeons, scrapping on street-corners; as well as flocks of more elegant racing birds, circling above the old Malay quarter, with its bright little houses from another century. All mixed up, of course, with the raucous gulls, blown in from the bay like sailors on shore leave. And every now and then, high, high off the corner of Table Mountain, you’ll spot the twin dots of a pair of black eagles, way up there.

Which brings us back, inevitably, to the mountain: the glorious tyrant of our sky- line. All stories about Cape Town begin and end here, it seems. So too our tour. So wave goodbye to the taxi-driver, check your possessions, and count up your souvenirs: a flake of rust from a tanker in the bay; a bedraggled gull feather; a twist of quagga hair; a fallen number-plate from a speeding taxi. Jumbled together, they don’t look like much, and they probably won’t get through security

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at the airport. But put them all in a bag, shake them up with some drops of sea- water and some mountain flowers, and take a sniff: that’s what Cape Town smells of, my version of it anyway. Then open the bag and let the south-easter steal your souvenirs; let them blow away. They won’t be lost or go to waste. They’ll end up lining a penguin nest, or part of a house, or in the foundations for a new road, or in the belly of a seal; some place you’d never expect. For a moment, you’ve held a city in your hand. Next second, it’s scattered, never to occur in quite that combination again. And now I’ll release you from the tour and let you go. Shops close late at the Waterfront – you can still make it if you rush. Buy that postcard of a change- less beach, a motionless sea, and send it home. Then find me again tomorrow and we’ll do it all again – don’t forget your sunscreen and a packed lunch. It will be a different city tomorrow, I guarantee.

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Henrietta Rose-Innes, 37, studied archaeology prior to earning her master’s degree in creative writing under the guidance of J. M. Coetzee, literature professor and Nobel laureate. She has been awarded several honors in her homeland for her literary works. She teaches creative writing at the University of Cape Town, the city in which she was born and raised.

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Vorsprung Charisma www.audi.com/ar2008/charisma

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Audi Group Finances 2008

126 Corporate Governance

127 Audi Share Performance

128 Management Report of the Audi Group for the 2008 fiscal year

128 Business and underlying situation 157 Financial performance 159 Net worth 160 Financial position 160 Report on post-balance sheet date events 161 Risk report 165 Report on expected developments 169 Disclaimer

The fuel consumption and emission figures for the vehicles named in the Management Report of the Audi Group are listed from page 232 onward.

170 Consolidated Financial Statements of the Audi Group at December 31, 2008

170 Income Statement

171 Balance Sheet

172 Cash Flow Statement

173 Statement of Changes in Equity

174 Notes to the Consolidated Financial Statements 174 Development of fixed assets in the 2008 fiscal year 176 Development of fixed assets in the 2007 fiscal year 178 General information 183 Recognition and measurement principles 189 Notes to the Income Statement 196 Notes to the Balance Sheet 209 Additional disclosures 227 Events occurring subsequent to the balance sheet date 228 Statement of Interests held by the Audi Group

229 Responsibility Statement

230 Auditor’s Report

231 Declaration of the AUDI AG Board of Management

126

Corporate Governance

Code amended in 2008 On August 8, 2008, the German Federal Ministry of Justice promulgated the version of the German Corporate Governance Code dated June 6, 2008. The Board of Management and Supervisory Board of AUDI AG discussed the amendments at length during the past fiscal year and passed the appropriate resolutions.

Implementation of the recommendations and suggestions The recommendations in the Code, as amended on June 14, 2007, had been largely complied with until the announcement of the new version on August 8, 2008. Since the announcement of the version dated June 6, 2008, the recommendations in the Code have been conformed to with the following exceptions: The recommendation in the Code to provide for a severance payment cap when concluding contracts with Board of Management members (Section 4.2.3, Para. 4 ff. of the Code) is not complied with. There are doubts in professional circles as to the validity of such contractual clauses, which restrict the Supervisory Board’s scope of action without creating significant benefits under current law. In addition, the Supervisory Board has not formed a nominating committee (Section 5.3.3 of the Code). In the opinion of the Board, such a committee would merely increase the number of committees without noticeably improving the work of the Supervisory Board. The elections to the Supervisory Board do not take the form of elections of individuals (Section 5.4.3, Sentence 1 of the Code). Elections by list are a common practice in democratic elections. AUDI AG moreover does not disclose the remuneration of members of the Supervisory Board individually, broken down by components (Section 5.4.6, Para. 3, Sentence 1 of the Code), in order not to infringe on privacy rights. Four departures are made from the suggestions in the Code: The Annual General Meeting will not be broadcast over the Internet (Section 2.3.4 of the Code) in order not to infringe on the privacy rights of individual stockholders. For this reason, the provision for absent stockholders to even be able to contact the Company’s voting proxy (Section 2.3.3, Sentence 3, 2nd half of sentence of the Code) during the Annual General Meeting is superfluous. AUDI AG continues to disregard the suggestion made by the Code to incorporate both one-off and annually recurring variable components based on business performance into the remuneration for members of the Board of Management (Section 4.2.3, Para. 2, Sentence 2 of the Code) and to incorporate components based on the Company’s long-term performance into the remuneration for members of the Supervisory Board (Section 5.4.6, Para. 2, Sentence 2 of the Code). It will continue to follow the discussion in professional circles as to the specific form to be taken by such variable components before changing its stance on this matter.

Particulars pursuant to Section 6.6 of the Code No reportable acquisition or sales transactions were conducted during the past fiscal year.

Stock option plans and similar securities-based incentive arrangements AUDI AG does not offer any such plans or incentive arrangements.

System of remuneration The basic principles of the remuneration system for the members of the Board of Management are detailed in the Notes to this Annual Report under “Details of the Supervisory Board and Board of Management.” This information is also available on the Company’s website (www.audi.com/notes).

Declaration relating to the Code on the Internet The joint declaration of the Board of Management and Supervisory Board of AUDI AG on the recommendations of the German Corporate Governance Code was published on the Audi website (www.audi.com/cgk-declaration) on November 24, 2008.

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Audi Share Performance

Stock market developments The dramatic development of the U.S. real estate and financial crisis placed capital markets under severe pressure in the second half of 2008. Increasing liquidity bottlenecks moreover prompted the collapse of certain major international banks. State rescue packages and economic recovery programs, coupled with quantitative easing policies by major central banks, did little to halt the plummeting share prices on stock markets worldwide. After starting the year on 8,046 points, the German Share Index (DAX) for example already showed a significant retreat to below 6,500 points within the first few weeks of the year. The lead index subsequently exhibited a weak downward trend until the end of September. Follow- ing a renewed sharp slump in trading prices at the start of the fourth quarter, the DAX reached its year-low of 4,127 points in November and closed the year at 4,810 points.

Audi trading price trend The trading price of Audi shares broadly exhibited a sideways shift in the first half of the year, before yielding to the general market trend at the start of the third quarter. There then followed a further period of price movements within a narrow range of EUR 444 to 501. After suffering rapid, steep losses from the start of November, the trading price regained this level in the remaining weeks of the year to close 2008 at EUR 466. Audi shares thus ended the year 26 percent down on the opening price for the year, having performed well compared with the German Share Index, which lost 39 percent over the same period.

Takeover bid by Porsche Automobil Holding SE, Stuttgart In connection with the increase in its interest in Volkswagen AG (Wolfsburg) to a total of 35.14 percent of ordinary shares and voting rights in Volkswagen AG, Porsche Automobil Holding SE (Stuttgart) submitted a mandatory offer to the remaining shareholders of AUDI AG on September 29, 2008 pursuant to Section 35, Para. 2 of the German Securities and Takeover Act (WpÜG). The Board of Management and Supervisory Board of AUDI AG submitted a rea- soned opinion on the mandatory offer on October 16, 2008 pursuant to Section 27 of WpÜG. By the deadline for acceptance, the offer had been accepted for 0.41 percent of Audi shares. The shares taken up by Porsche Automobil Holding SE under the mandatory offer were acquired by Volkswagen AG from Porsche Automobil Holding SE, with the result that Volkswagen AG’s interest in AUDI AG increased to 99.55 percent.

Profit transfer and compensatory payment to stockholders A control and profit transfer agreement is in force between AUDI AG and Volkswagen AG, which controls 99.55 percent of the capital stock of the former. In lieu of a dividend payment, outside stockholders receive a compensatory payment. The level of this payment is calculated from the dividend distributed on one Volkswagen AG ordinary share for the same fiscal year, as determined by the Annual General Meeting on April 23, 2009.

INDEXED AUDI TRADING PRICE TREND (ISIN: DE0006757008, WKN: 675700)

2004 2005 2006 2007 2008

350 % 300 % 250 % 200 % 150 % 100 % 50 % Audi share German share index (DAX)

128

Management Report of the Audi Group for the 2008 fiscal year

BUSINESS AND UNDERLYING SITUATION THE GROUP

Company With its two brands Audi and Lamborghini, the Audi Group is one of the most successful carmakers worldwide, active both in the premium and supercar segments. At the core of the Company is the Audi brand, whose vehicles captivate customers around the world with their modern design, superb build quality and technological innovations. The focal point of all activities is the development of pioneering, sustainable automotive concepts aimed at fully satisfying customer demands for ever better solutions. This philosophy is manifested in the brand essence “Vorsprung durch Technik,” which encompasses the brand values of sportiness, sophistication and progressiveness. Customers can experience this brand identity through an extensive and diverse range of models. Thanks to these strengths, the Audi brand succeeded in maintaining its growth on global auto markets last year, despite the dramatic slump that affected many areas of the market towards the end of the fiscal year due to the financial crisis. This helped it to build on its already strong competitive position. In fact, the past fiscal year saw the Company deliver over one million premium cars of the Audi brand for the first time in its history.

AUDI VEHICLE DELIVERIES BY REGION

2008 Share in % Germany 258,111 25.7 Europe excluding Germany 451,566 45.0 China (incl. Hong Kong) 119,598 11.9 USA 87,760 8.8 Other 86,434 8.6 Total 1,003,469 100.0

The Italian time-honored brand Lamborghini embodies fascinating, uncompromising, exclusive supercars and has been enjoying a steady increase in demand for some years now. In the 2008 fiscal year, 2,430 (2,406) sports cars with the mark of the bull were delivered to customers – a new all-time record in the Company’s history, despite the difficult underlying situation. In addition to models of the Audi and Lamborghini brands, the Audi Group supplied customers with 217,607 (234,144) vehicles of other Volkswagen Group brands in 2008 through its sales subsidiaries.

Group structure and principal group companies The Audi Group is headquartered in Ingolstadt. This is where Technical Development, Sales, Administration and substantial portions of the manufacturing operations are based. In addition to the A3, A3 Sportback, A4 Sedan, A4 Avant, A5 Coupé and Audi Q5, the ultra-sporty S3, S3 Sportback, S4 Sedan, S4 Avant and S5 Coupé versions are built there as well. The bodies of the A3 Cabriolet and TT series are also made in Ingolstadt. The Company’s second German location in Neckarsulm is where the A4 Sedan, A5 Cabriolet, A6 Sedan, A6 Avant, A6 allroad quattro and the A8 luxury sedan are built, together with the high-performance derivative models S5 Cabriolet, S6 Sedan, S6 Avant, S8 and A8 W12. quattro GmbH is also based in Neckarsulm. This company, a wholly owned subsidiary of

AUDI AG, manufactures the high-performance vehicles RS 6 Sedan, RS 6 Avant and Audi Q7 V12 TDI quattro, and is also responsible for the exclusive, hand-crafted manufacture of the Audi R8 mid-engine sports car. quattro GmbH also supplies an extensive customization program for all Audi models (e.g. S line, Audi exclusive) and sells exclusive lifestyle articles that embody the spirit of the brand with the four rings.

129

AUDI BRUSSELS S.A./N.V. (Brussels, Belgium) builds the Audi A3 and, on behalf of Management Report Volkswagen AG (Wolfsburg), the VW Polo. 128 Business and underlying situation AUDI HUNGARIA MOTOR Kft. develops and builds engines for AUDI AG and other Volkswagen 128 The Group Group companies, as well as for third-party companies in Győr (Hungary). The TT and TTS 131 Corporate steering 134 Research and development models in both Coupé and Roadster body versions and, under contract from AUDI AG, the 136 Employee matters A3 Cabriolet are also built there in partnership with the Ingolstadt plant. Audi Hungaria is 139 Audi in society 141 Environmental aspects now one of the country’s largest businesses and has become an important economic force. 147 Economic environment The Bologna region of Italy is home to Automobili Lamborghini S.p.A., which builds the 150 Course of business 157 Financial performance supercars Gallardo LP 560-4, Gallardo LP 560-4 Spyder, Murciélago LP 640 and Murciélago 159 Net worth LP 640 Roadster. 160 Financial position 160 Report on post-balance sheet VOLKSWAGEN GROUP ITALIA S.P.A., a subsidiary of Automobili Lamborghini Holding S.p.A. date events based in Verona (Italy), sells vehicles of the Audi brand and other Volkswagen Group brands 161 Risk report 165 Report on expected in Italy. developments 169 Disclaimer Consolidated companies AUDI AG’s largest stockholder is Volkswagen AG (Wolfsburg), which holds around 99.55 percent of the capital stock. A control and profit transfer agreement is in effect between the two companies. Volkswagen AG includes the consolidated financial statements of AUDI AG in its own consolidated financial statements. Control and profit transfer agreements also exist between AUDI AG and its principal German subsidiaries. The Audi Group has increased in scope since December 31, 2007 and now includes Audi Zentrum Hamburg GmbH (Hamburg) and Audi Zentrum Berlin-Charlottenburg GmbH & Co. KG (Berlin) as well as AUDI BRUSSELS S.A./N.V. (Brussels, Belgium), which was consolidated in keeping with the conditions set forth in IAS 27.13, Sentence 2. Following its sale as of December 1, 2008 to Volkswagen do Brasil Indústria de Veículos Automotores Ltda. (São Bernardo do Campo, Brazil), AUDI DO BRASIL E CIA. (Curitiba, Brazil) no longer belongs to the Group.

FULLY CONSOLIDATED COMPANIES WITHIN THE AUDI GROUP

AUDI AG

Automobili AUDI BRUSSELS AUDI HUNGARIA Lamborghini quattro GmbH Other companies S.A./N.V. MOTOR Kft. Holding S.p.A.

• Automobili Lamborghini S.p.A. • Audi Australia Pty Ltd. • Lamborghini ArtiMarca S.p.A. • Audi Brasil Distribuidora de Veículos Ltda. • MML S.p.A. • Audi Canada Inc. • VOLKSWAGEN GROUP ITALIA S.P.A. • Audi Japan K.K. VOLKSWAGEN GROUP FIRENZE S.P.A. • Audi of America, LLC • Audi Retail GmbH Audi Zentrum Berlin-Charlottenburg GmbH & Co. KG Audi Zentrum Hamburg GmbH Audi Zentrum Hannover GmbH • Audi Vertriebsbetreuungsgesellschaft mbH • Audi Volkswagen Korea Ltd. • Audi Volkswagen Middle East FZE

Disclosures required under takeover law The following disclosures under takeover law are made pursuant to Section 289, Para. 4 and Section 315, Para. 4 of the German Commercial Code (HGB):

Capital structure On December 31, 2008, the issued stock of AUDI AG remained unchanged at EUR 110,080,000 and comprised 43,000,000 no-par bearer shares. Each share represents a mathematical share of EUR 2.56 of the issued capital.

130

Stockholders’ rights and obligations Stockholders enjoy property and administrative rights. The property rights include, above all, the right to a share in the profit (Section 58, Para. 4 of the German Stock Corporation Act [AktG]) and in the proceeds of liquidation (Section 271 of the German Stock Corporation Act), as well as a subscription right to shares in the event of capital increases (Section 186 of the German Stock Corporation Act). The administrative rights include the right to participate in the Annual General Meeting and the right to speak, ask questions, table motions and exercise voting rights there. Stockholders may assert these rights, in particular, by means of a disclosure and avoidance action. Each share carries an entitlement to one vote at the Annual General Meeting. The Annual Gen- eral Meeting elects the members of the Supervisory Board to be appointed by it, as well as the auditors; it decides, in particular, on the ratification of the acts of members of the Board of Management and Supervisory Board, on amendments to the Articles of Incorporation and By- laws, as well as on capital measures, on authorizations to acquire treasury shares and, if necessary, on the conduct of a special audit, the dismissal of members of the Supervisory Board within their term of office and on liquidation of the Company. The Annual General Meeting normally adopts resolutions by a simple majority of votes cast, unless a qualified majority is specified by statute. A control and profit transfer agreement exists between AUDI AG and Volkswagen AG (Wolfsburg) as the controlling company. This agreement permits Volkswagen AG to issue instructions. The net profit of AUDI AG available for distribution is transferred to Volkswagen AG. Volkswagen AG is obliged to make good any loss. All Audi stockholders (with the exception of Volkswagen AG) receive a compensatory payment in lieu of a dividend. The amount of the compensatory payment corresponds to the dividend distributed in the same fiscal year to Volkswagen AG stockholders for each Volkswagen ordinary share.

Capital interests exceeding 10 percent of the voting rights Volkswagen AG (Wolfsburg) holds around 99.55 percent of the voting rights in AUDI AG. For details of the voting rights held in Volkswagen AG, please refer to the Management Report of Volkswagen AG.

Composition of the Supervisory Board The Supervisory Board comprises 20 members. Half of them are representatives of the stockholders, elected by the Annual General Meeting; the other half are employee representatives elected by the employees in accordance with the German Codetermination Act. A total of seven of these employee representatives are employees of the Company; the remaining three Supervi- sory Board members are representatives of the unions. The Chairman of the Supervisory Board, a stockholder representative elected by the members of the Supervisory Board, ultimately has two votes on the Supervisory Board in the event of a tie vote, pursuant to Section 13, Para. 3 of the Articles of Incorporation and Bylaws.

Statutory requirements and provisions under the Articles of Incorporation and Bylaws on the appointment and dismissal of members of the Board of Management and on the amendment of the Articles of Incorporation and Bylaws The appointment and dismissal of members of the Board of Management are stipulated in Sec- tions 84 and 85 of the German Stock Corporation Act. Members of the Board of Management are accordingly appointed by the Supervisory Board for a period of no more than five years. Reappointment or an extension of the term of office, in each case for no more than five years, is permitted. Section 6 of the Articles of Incorporation and Bylaws further stipulates that the number of members of the Board of Management is to be determined by the Supervisory Board and that the Board of Management must comprise at least two persons. Section 9, Para. 3 of the Articles of Incorporation and Bylaws stipulates that the term of office for a Supervisory Board member elected to replace a Supervisory Board member who has not fulfilled his term of office ends upon expiry of the term of office of the Supervisory Board member leaving.

131

Authorizations of the Board of Management in particular to issue new shares and to Management Report re-acquire treasury shares 128 Business and underlying situation According to stock corporation regulations, the Annual General Meeting may grant authoriza- 128 The Group tion to the Board of Management for a maximum of five years to issue new shares. The meeting 131 Corporate steering 134 Research and development may give it authorization, again for a maximum of five years, to issue convertible bonds on the 136 Employee matters basis of which new shares are to be issued. The extent to which the stockholders have an option 139 Audi in society 141 Environmental aspects on these new shares is likewise decided upon by the Annual General Meeting. The acquisition of 147 Economic environment treasury shares is regulated by Section 71 of the German Stock Corporation Act. 150 Course of business 157 Financial performance 159 Net worth Key agreements by the parent company that are conditional on a change of control 160 Financial position 160 Report on post-balance sheet following a takeover bid date events AUDI AG has not reached any agreements that are conditional on a change of control following 161 Risk report 165 Report on expected a takeover bid. Nor has any compensation been agreed with members of the Board of Manage- developments ment or employees in the event of a takeover bid. 169 Disclaimer

CORPORATE STEERING

Strategy In the past fiscal year, the management and employees continued to work intensively on achieving the Company’s strategic objectives. The important key points reflect four strategic dimensions:

THE AUDI GROUP’S “ROUTE 15” STRATEGY

The Audi strategy

Customer enthusiasm Most attractive Increasing market share and image leader for High profitability employer emotion and quality

In the wake of the increasingly acute financial crisis in the second half of last year and the negative consequences of this crisis on the entire automotive industry, the long-term objectives and the possibility of realizing them were discussed at length in the past fiscal year. Thanks to a fresh and attractive product range, a comfortable margin of financial resources, and the prompt and ongoing implementation of measures to improve costs, the management believes that the Company is well positioned to continue growing under its own momentum in the medium to long term in keeping with recent years, even if the economic environment should continue to deteriorate in the short term. In specific, a comprehensive and detailed package of measures spanning all four objectives has been approved and implemented:

Increasing market share In the past fiscal year, the Audi brand celebrated its 13th record-breaking year in a row, delivering over one million premium cars in a year for the very first time. For the coming years, the Audi Group management has set itself the goal of further increasing its market share in all important markets. The long-term model initiative is a key component of this strategy. In 2008 alone, the Company launched 17 new products, which met with great approval from customers, dealers and trade journalists around the world. Significant product launches included the Audi A3 Cabriolet, the Audi A4 Avant and the Audi Q5, which expanded the premium SUV segment by one more attractive model. In addition, the Company unveiled updated versions of the core car lines Audi A3 and Audi A6 with enhanced design and numerous new technological features. 2009 will see many more new additions to the fresh, sporty product family. For example, the new Audi A5 Cabriolet and S5 Cabriolet, and the particularly sporty Audi S4 and Audi S4 Avant versions will appear on the market in the first half of the year.

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At the same time, the Audi Group is steadily increasing its engagement in car markets around the world. The high saturation of traditional sales markets means that relatively new, burgeoning markets like Russia, India and China are of particular importance for the future growth of the Audi brand. The Company is therefore gradually expanding its exclusive dealer and service network in these countries. Furthermore, AUDI AG added the new Audi A4 last year to its local CKD assembly operation in India. At the beginning of this year, the first long-wheelbase version in the upper midsize category went on sale in China, currently the leading export market. The

new Audi A4 L satisfies the customer’s desire for progressive mobility and excellent spacious- ness, cementing the Audi brand’s leading position in the Chinese premium segment. Further- more, the brand with the four rings has announced its intention to launch diesel technology in the United States, the world’s largest auto market. The aim is to convince future American customers of the high performance and efficiency of this modern propulsion method, adding further momentum to Audi’s plans for growth over the medium term.

Customer enthusiasm and image leader in emotion and quality At a time when competition is becoming increasingly fierce, a strong and desirable brand provides a sound basis for lasting success. The key focus of all Audi Group activities is therefore on further strengthening the current image positioning of the Audi brand and creating an emotional bond between customer and brand through captivating products. Alongside unique design and outstanding quality, the emphasis is on giving customers that proverbial “Vorsprung durch Technik.” Once again, the Audi brand underscores its prominent position in the field of technology through innovative and sustainable vehicle concepts that provide solutions today for tomorrow’s mobility issues. One example of this is provided by its highly efficient e models, whose extremely good fuel efficiency and emissions are a compelling example of how sportiness does not have to be forfeited for efficiency. The public’s unstinting enthusiasm for the Audi brand and its vehicles was again expressed by numerous awards in the past fiscal year. For example, readers of the trade magazine Auto Zeitung voted the brand with the four rings top in its “Image Report 2008,” giving it five wins in a row. In addition, the Audi A4, Audi A6 and Audi R8 won the same magazine’s “Auto Trophy 2008” (issue 24/2008 and issue 25/2008) in their respective classes. In the important “Best Cars” reader poll sponsored by the trade publication auto motor und sport (issue 4/2008), four Audi models came out on top: the Audi A3, Audi A4, Audi A6 and Audi R8. The Audi R8 claimed a double victory at the World Car of the Year Awards 2008 (March 20, 2008) by capturing the titles “World Performance Car” and “World Car Design of the Year.” Even before it arrived on the market, the new Audi Q5 carried off the “Golden Steering Wheel” sponsored by the newspaper Bild am Sonntag (issue 45/2008). The Audi brand also enjoyed widespread international ac- claim. In China, it ranked first in the J.D. Power Asia Pacific 2008 China Sales Satisfaction Index (SSI) StudySM (August 28, 2008), which gauges the satisfaction of new car owners. Furthermore,

the Audi A6 L, Audi Q7 and Audi R8 earned the distinction of “Best Cars” in their class in a reader poll taken by the Chinese edition of the trade magazine auto motor und sport (issue 2/2008). Once again, Audi did justice to its brand attribute of sportiness with an array of motor-racing triumphs in the past year. The legendary Audi R10 TDI diesel-powered racing car, which features cutting-edge diesel technology, took victory in the 24 Hours of Le Mans for the third time in a row and won both the European and American Le Mans Series in the bargain. The competition version of the new Audi A4 won the internationally popular touring-car racing series, the German Touring Car Masters (DTM), on its very first time out, continuing the previous year’s success. With four wins out of four, 2008 was thus the most successful year for motor sports in the Company’s history. This serves to document the competitiveness of the Audi brand’s technology.

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High profitability Management Report The Audi Group management’s primary objective within the scope of its “Route 15” strategy is 128 Business and underlying situation to achieve sustainable growth. As well as further increasing the market share in key markets, 128 The Group high profitability in particular is at the focus of all activities. Within the context of this value- 131 Corporate steering 134 Research and development oriented corporate management approach, growth also has to be profitable if it is to meet the 136 Employee matters premium standards of the Audi Group. 139 Audi in society 141 Environmental aspects Sustainable, high profitability is encouraged in particular by continuously reassessing processes 147 Economic environment and structures in order to improve efficiency and realize cost-cutting potential, while also im- 150 Course of business 157 Financial performance plementing wide-ranging measures to permanently optimize material costs and ensure system- 159 Net worth atic investment management. 160 Financial position 160 Report on post-balance sheet date events Most attractive employer 161 Risk report 165 Report on expected If the Audi Group is to continue the impressive achievements of the past, it will have to continue developments to depend on committed and highly skilled employees. Therefore, one of the Company’s core 169 Disclaimer strategic goals is to enhance its attractiveness as an employer even further. The associated activities include creating a working environment that demands and encourages the ongoing development of the entire workforce. The Company acknowledges the great dedication of its employees not only through performance-based remuneration and profit sharing, but in particular by staging events like the Audi Family Day 2008. The wide range of measures aimed at boosting the Company’s attractiveness as an employer also includes flexible working hour programs and comprehensive preventive health care. The tremendous success of these measures can be gauged through regular internal employee surveys. However, external surveys like the one conducted by the renowned trendence Institute in Berlin (“The German Student Barometer – Business and Engineering Edition,” 8/2008) also show the Audi Group as being one of the most popular employers of all in 2008. The Company took first place among engineers, a critical occupation group.

Internal steering system One of the most important goals of the Audi Group is to consistently increase the Company’s value. Internal steering is based on return on investment (RoI), which serves as a gauge of the return on capital employed for various types and scales of investment projects. RoI thus indi- cates the development of a company’s profitability and is calculated according to the following formula:

Operating profit after tax Return on investment (RoI) = x 100 Average invested assets

EUR million 2008 2007 Operating profit after tax 1,940 1,758 Average operating assets 13,157 12,100 – Average non-interest-bearing liabilities 3,343 2,639 = Average invested assets 9,814 9,461 Return on investment (in %) 19.8 18.6

In the 2008 fiscal year, the Audi Group improved its return on investment to 19.8 percent despite an environment dominated by increasingly difficult conditions. This makes the Audi Group one of the most profitable businesses in the international automotive industry and gives impressive proof of its remarkable competitiveness.

System of remuneration for the Supervisory Board and Board of Management Information on the system of remuneration for the Supervisory Board and Board of Manage- ment is provided in the Notes to the Consolidated Financial Statements under Section 48 “Details relating to the Supervisory Board and Board of Management.”

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RESEARCH AND DEVELOPMENT

In developing and marketing innovative technical concepts, the Audi Group has played an instrumental role in shaping the modern automotive industry. The Company again brought numerous innovations to production maturity in the past fiscal year. The total number of employees in the Research and Development area averaged 6,556 (6,230) over the year, comprising 6,293 (5,993) at AUDI AG, 116 (107) at AUDI HUNGARIA MOTOR Kft. (Győr, Hungary) and 147 (130) at Automobili Lamborghini S.p.A. (Sant’Agata Bolognese, Italy).

RESEARCH AND DEVELOPMENT EXPENDITURE RECOGNIZED AS AN EXPENSE

EUR million 2008 2007 Research expense and non-capitalized development costs 1,631 1,570 Amortization and disposals of capitalized development costs 530 656 Total research and development expenditure recognized as an expense 2,161 2,226

Technical innovations

Efficient e model for the full-size category With the launch of the first e models in 2007, the Audi brand was again able to demonstrate that sportiness and efficiency are not a contradiction in terms. This ultra-economical, low- emission vehicle concept is now also available in the full-size category. The Audi A6 2.0 TDI e, with a power output of 100 kW (136 hp) and peak torque of 320 Nm, achieves an impressive average fuel consumption of 5.3 liters of diesel fuel per 100 kilometers.

Its CO2 emissions are a scant 139 g/km.

2.0-liter TFSI engine is the “International Engine of the Year” Last year, for the fourth time in a row, a jury of 65 leading motor journalists from 32 countries voted the 2.0-liter TFSI engine the winner of the “International Engine of the Year” award (May 7, 2008). The engine was particularly commended for its high efficiency and its flexibility, which makes it suitable for use in the various vehicle models. The four-cylinder gasoline unit made its debut in summer 2004 in the Audi A3 Sportback. The Audi Group is currently offering its newest and most powerful version, which has 200 kW (272 hp), in the Audi TTS Coupé and Roadster. In these two ultra-sporty models, this power unit combines with the S tronic dual- clutch transmission to achieve a very good average fuel consumption of 7.9 and 8.0 liters of

Super Plus gasoline per 100 kilometers respectively. This equates to CO2 emissions of 184 and 187 g/km respectively.

Inventor of the Audi valvelift system (AVS) receives the “Hans List Award” During the FISITA World Automotive Congress, AVL List GmbH (Graz, Austria) presented Audi engine developer Dr. Stefan Dengler with the “Hans List Award” (September 19, 2008), which is given to honor the achievements of innovative engineers. Dengler, a mechanical engineer, received EUR 50,000 in prize money for developing the Audi valvelift system (AVS). The system permits intelligent control of the intake and exhaust valves on gasoline engines, thereby increasing their power and torque while improving their fuel efficiency. The Audi valvelift system demonstrates its strengths in the Audi A4 2.0 TFSI among others. With an output of 155 kW (211 hp) and peak torque of 350 Nm, this front-wheel drive sedan with manual transmission averages 6.6 liters of premium gasoline over 100 kilometers. It has

CO2 emissions of 154 g/km. This progressive engine technology is also used in many other models of the Audi brand. The Audi Group believes the Audi valvelift system offers tremendous potential for further improvements to the efficiency of gasoline engines. Future versions could even conceivably shut off individual cylinders altogether.

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Audi S tronic with seven speeds Management Report In the past fiscal year, the Audi Group unveiled the newly developed seven-speed S tronic 128 Business and underlying situation dual-clutch transmission. This concept, which is specially designed for the combination of 128 The Group longitudinally installed engines and quattro all-wheel drive, facilitates gear changes within 131 Corporate steering 134 Research and development a few hundredths of a second and virtually without any interruptions to the power flow. 136 Employee matters This is all made possible by two permanently active subsidiary transmissions, one of which is 139 Audi in society 141 Environmental aspects connected to the engine at any given time. When the driver accelerates the car, for instance, 147 Economic environment the next-higher gear is already engaged in the other subsidiary transmission. To increase 150 Course of business 157 Financial performance driving enjoyment even further, there is also the option of changing gear using shift paddles 159 Net worth on the steering wheel. 160 Financial position 160 Report on post-balance sheet Quite apart from its very sporty characteristics, the seven-speed S tronic is notably efficient. date events Its high efficiency and intelligent control function in automatic mode team up to maximize 161 Risk report 165 Report on expected fuel efficiency. In addition, the maximum possible transmission spread of 8.0 : 1 offers a sporty, developments short transmission ratio for the first gear as well as a rev-reducing long ratio for the highest 169 Disclaimer gear. The new seven-speed S tronic is available in sporty models of the mid-range car lines.

New generation of the Multi Media Interface (MMI) with higher performance The new-generation Multi Media Interface (MMI) made its debut last summer in the Audi A8 luxury sedan. Every aspect of this system has been further designed so that it now offers a combination of even better performance and, in particular, greater ease of operation. The optionally available MMI navigation plus features a joystick on the central control knob for even easier navigation. In addition, a 7-inch, high-resolution (800 x 480 pixels) color monitor with LED backlighting provides a sharp, high-contrast picture even under difficult light conditions. One technological highlight of the MMI navigation plus is its new navigation program. Besides having a conventional two-dimensional view, the driver can also select a three-dimensional map view. And, whenever appropriate, the navigation system suggests a route that will help the driver achieve maximum fuel efficiency. Other important features of the new-generation system are an integrated drive for audio, video and navigation DVDs, and, in the case of MMI navigation plus, a 40 GB hard drive that can store up to 5,000 addresses and as many as 3,000 music tracks, which can be sorted as desired. The new generation of MMI is already available in a wide range of Audi models.

Audi Space Frame (ASF) honored with European Inventor of the Year Award 2008 In developing the Audi Space Frame (ASF), the Audi Group played a crucial role in lightweight automotive construction. The revolutionary concept, which first went into production in the Audi A8 in 1994, has been honored with the European Patent Office’s European Inventor of the Year Award 2008 (May 6, 2008). The high-strength aluminum frame construction weighs much less than conventional steel bodied vehicles. The Audi Space Frame has paved the way for enhanced fuel efficiency, making a vital contribution towards cutting a vehicle’s polluting emissions. This pioneering aluminum technology currently features not only on the Audi A8, making it the only luxury sedan to combine an aluminum body with quattro drive, but also on the Audi TT, Audi R8 and Lamborghini Gallardo.

Innovations for safety

High-beam assistant for better illumination The Audi brand has been supplying customers with a high-beam assistant in combination with xenon plus headlamps in virtually all car lines since last year. The driver can activate this function at twilight or when it gets dark by using the high-beam headlamp lever. Once activated, it monitors the traffic situation almost continuously by means of a camera system integrated into the interior rearview mirror. Depending on whether or not it detects other vehicles, the system either raises or dips the headlamp beams. Not only does it relieve the driver from having to

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perform this routine task, the high-beam assistant ensures that the road ahead is better illuminated; it also helps avoid dazzling other motorists unintentionally.

10 years of accident research promoting road safety In November 1998, AUDI AG launched the Audi Accident Research Unit (AARU), a research partnership with Regensburg University Hospital and the Bavarian Ministry of the Interior that inves- tigates the events leading up to an accident. Since then, the goal of the project, which is entirely financed by AUDI AG, has been to improve overall traffic safety and to further develop the safety equipment of current and future Audi models. In addition to conducting technical and medical accident analyses, particular attention is paid to psychological aspects. This information is then used to shed light on a driver’s responses and subjective perceptions in the pre-crash phase, and facilitate the development of efficient driver assistance systems all the way back in the project development phase.

Active safety systems to help prevent accidents One example of how findings of the Audi Accident Research Unit (AARU) have filtered through to the latest models is the radar-supported Audi side assist system, which first appeared in the Audi Q7. Studies made by accident researchers established that when changing lanes, drivers not only tend to overlook vehicles in the blind spot but in particular fail to notice cars approaching from behind or underestimate how quickly these are traveling. Audi side assist was therefore conceived to not only detect vehicles in the blind spot, but also to detect those approaching from behind at high speeds. A signal lights up on the outside rearview mirror to warn the driver whenever the sensors identify such situations. The Audi brand also offers a wide variety of other safety and convenience systems to support the driver in the task of driving. Certain systems are designed to tackle accidents at the source. For instance, Audi lane assist alerts the driver should his car inadvertently drift out of its lane. Another option available on Audi models is the adaptive cruise control (ACC) system, which regulates the distance to a preceding vehicle detected by the radar sensor by means of controlled braking and acceleration. If the vehicle in front brakes abruptly, Audi braking guard is activated. This system initially warns the driver by means of visible and audible signals and then, if need be, briefly but forcefully applies the brakes to prompt the driver to brake the car if necessary.

EMPLOYEE MATTERS

Workforce

2008 2007 Audi Group, average for the year 57,533 53,347 of which: AUDI AG 46,089 44,698 Ingolstadt plant 32,603 31,369 Neckarsulm plant 13,486 13,329 AUDI BRUSSELS S.A./N.V. 2,134 – AUDI HUNGARIA MOTOR Kft. 5,925 5,623 Lamborghini Group 1) 989 933 VOLKSWAGEN GROUP ITALIA S.P.A. 2) 894 900

1) excluding VOLKSWAGEN GROUP ITALIA S.P.A. and VOLKSWAGEN GROUP FIRENZE S.P.A. 2) excluding VOLKSWAGEN GROUP FIRENZE S.P.A.

The Audi Group employed an average of 57,533 (53,347) people in the 2008 fiscal year.

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As a result of continuing corporate growth, the workforce of AUDI AG itself grew by 1,391 Management Report employees, a large proportion of them engineers. As of January 1, 2008, AUDI AG assumed 128 Business and underlying situation management responsibility for AUDI BRUSSELS S.A./N.V. (Brussels, Belgium), thereby consoli- 128 The Group dating it within the Audi Group. In the first year of its inclusion in the Group, on average 2,134 131 Corporate steering 134 Research and development employees were employed. At the Hungarian subsidiary AUDI HUNGARIA MOTOR Kft., the 5.4 136 Employee matters percent growth in human resources can first and foremost be attributed to higher vehicle manu- 139 Audi in society 141 Environmental aspects facturing output. The number of employees at the Lamborghini Group (excluding VOLKSWAGEN 147 Economic environment GROUP ITALIA S.P.A. and VOLKSWAGEN GROUP FIRENZE S.P.A.) rose to 989 (933), again thanks 150 Course of business 157 Financial performance to its increased business volume. The workforce of VOLKSWAGEN GROUP ITALIA S.P.A. (exclud- 159 Net worth ing VOLKSWAGEN GROUP FIRENZE S.P.A.) in the past fiscal year was slightly down year-on-year. 160 Financial position 160 Report on post-balance sheet The average age of employees at the Audi Group’s manufacturing locations edged up slightly date events from 39.9 to 40.0 in 2008. At approximately 15.7 years, the average length of service also 161 Risk report 165 Report on expected remained more or less unchanged. Women accounted for 11.7 (11.8) percent of the workforce developments at Audi Group production sites. 169 Disclaimer

At the very beginning of 2008, AUDI AG announced plans to recruit new personnel, above all in the engineering professions. Around one-third of the AUDI AG workforce are now college graduates, an increase of 1.6 percentage points on the previous year. The proportion of foreign nationals employed by AUDI AG fell slightly to 8.2 (8.5) percent. The severely disabled continue to perform a meaningful role at AUDI AG, accounting for 5.3 (5.4) percent of the workforce in 2008. The volume of orders placed with workshops for the mentally disabled grew by over 20 percent to around EUR 4.5 million in the past fiscal year. AUDI AG remains at the vanguard of German industrial enterprises in terms of industrial safety. The accident index shows a downward trend which has now lasted over 20 years. Again in 2008, both the frequency and severity of accidents were lower than in the prior-year period. The attendance record for AUDI AG remained very high at 97.0 (97.0) percent. This outstanding result was made possible by continually improving the workplace organization and introducing numerous preventive health-care initiatives. Over 33,000 ideas were submitted in 2008 as part of the AUDI AG suggestions scheme. Of these, 56.8 percent were acted upon. The Deutsches Institut für Betriebswirtschaft (dib) voted AUDI AG’s suggestions award program as the best in the car industry for the fifth time in a row (March 13, 2008).

The Audi Group’s human resources policy The Audi Group’s human resources policy is instrumental in helping the Company achieve its strategic goal of becoming the most attractive employer. The focus here is not only on getting positive image ratings in surveys among graduates and young professionals, but also on establishing good relationships with employees. Personnel development is therefore a key priority. Three conditions must be met in order to successfully develop a person’s career: There must be opportunities to develop through learning and optimizing skills (competence development), opportunities to assume growing responsibility and autonomy (career development), and the individual must receive proper consideration for performance and commitment (pay development and profit sharing). Activities in these three areas must be so organized as to meet the challenges of intensifying competition. The Company has therefore set the following priorities for its human resources policy over the next few years. One is to use extensive competence management in meeting the growing demand for specialist and cross-specialty competences, thus satisfying the requirement for lifelong learning. Next, personnel development for standard-wage employees is to be organized through the introduction of a new system of succession planning. The third priority area is handling demographic change, which the Human Resources area is tackling as part of a broader concept. This concept encompasses everything from the organization of working conditions to training and management measures. What is important here is not just that an employee’s age is addressed, but that the whole process of aging itself is taken into consideration.

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In this context, Audi Group Human Resources is both instigator and service provider. Its human resources objective is clearly to establish the workforce as the most important factor for success. Therefore, the aim is to demonstrate that the Company’s success is actually the success of all its employees.

High appeal as employer among the 2008 class of engineers In two of the major employer ratings surveys taken in 2008 of graduates and students nearing the end of their studies, AUDI AG captured first place among students in the engineering sciences – a key group. Both the survey conducted by the market research institute Universum (“The Universum German Student Survey,” 5/2008) and the one taken of college graduates by the Berlin trendence Institute (“The German Student Barometer – Business and Engineering Edition,” 8/2008) saw the Company pull clear of the leading group to take top spot. A similar picture emerged among economics students. The survey conducted by the market research institute Universum placed AUDI AG among the top five companies, while the trendence Institute ranked it as the third-best employer. One of the Company’s four strategic goals is attractiveness as an employer. In addition to offering a good working environment, factors such as inspiring products, interesting tasks and room for personal development play an important role. Thanks to its long-term model initiative, the Company is also creating a wide range of operational areas for engineering and economics graduates.

Vocational training From a field of some 5,000 applicants, 682 were selected to enter the vocational training year beginning in September 2008: 453 for the Ingolstadt plant and 229 for the Neckarsulm plant. AUDI AG has thus kept the number of apprenticeships consistently high. New, attractive options have also been added to the overall scope of training programs. Young people entering the latest training intake can now complete a dual education in a choice of four vocations, qualifying them to enter a university of applied science. This program has already been available for tool- making apprentices for several years; the new options are training to become an automotive mechatronics specialist, a mechatronics specialist or an electronics specialist for automation technology, combined with courses at the technical college in Ingolstadt. The company has a similar apprenticeship program at the Neckarsulm plant. All in all, AUDI AG offers training programs for more than 20 vocations at both German sites. The Company places great emphasis on preventative health care even during vocational training. For example, the Audi Sports Days 2008, which took place at both German locations, used “Fitness and Fairness” as their slogan. 1,700 apprentices chose to take part in the sporting competition, held in July. The Health Care Department at AUDI AG was on hand to offer specific advisory and training services. In April 2008, and in partnership with a vocational school in Ingolstadt, AUDI AG launched a pilot project called “Fit4u” aimed at preventing and reducing incidences of excess weight in youth. Some 13 classes at the vocational school – 300 students – are receiving special health tuition over a period of 18 months. Besides giving these young people expert qualification, the course is aimed at helping them develop as individuals. The various course units are prepared and taught by speakers from the vocational school’s “Health” seminar, by health education students from the Catholic University of Eichstätt-Ingolstadt and by the AUDI AG Health Care Department. The main objective of the preventive program is to sensitize young people to the dangers of excessive weight from an early age upward, and to encourage them to eat healthily and keep fit. First-year apprentices, for instance, can take part in a free Nordic walking course at the Neckarsulm plant’s training center.

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Compatibility of job and family Management Report In October 2008, representatives of both the employers and employees of AUDI AG concluded a 128 Business and underlying situation company agreement that aims to improve the compatibility of work and family life. Even before 128 The Group this agreement was finalized, all employees on permanent contracts had enjoyed a guarantee of 131 Corporate steering 134 Research and development reemployment for up to seven years following the birth and rearing of a child. 136 Employee matters Last fall, “Audi nursing leave” was added to these offerings. In a departure from the statutory 139 Audi in society 141 Environmental aspects requirements for nursing leave, employees may now have their employee status suspended for 147 Economic environment up to three years in order to care for sick relatives. Moreover, if three years proves insufficient, it 150 Course of business 157 Financial performance is possible to resign from the Company entirely for up to a further four years and still have the 159 Net worth guarantee of reemployment. 160 Financial position 160 Report on post-balance sheet AUDI AG also offers an extensive range of options for part-time employment or teleworking as date events well as sabbaticals. The Company received two awards last year for its diverse activities aimed 161 Risk report 165 Report on expected at reconciling work and family life. On October 6, 2008, the Bavarian State Minister of Labor developments and Social Welfare, Family Affairs and Women presented AUDI AG with the “Bavarian Equal 169 Disclaimer Opportunity Award” in the category “Best Business Practice.” On November 20, 2008, the Baden-Württemberg Minister of Commerce presented the Company with an award for winning the state competition “Equal Opportunities at Work for Women and Men.”

Audi Family Day at the Ingolstadt plant To show appreciation for its employees’ impressive dedication, AUDI AG held an Audi Family Day on September 27, 2008. Over 130,000 visitors flocked to the festivities. Some 1,000 helpers representing every division of the Company thought up and prepared over 120 informative and interactive attractions, many of them aimed specifically at children. Staff members from all divisions had the opportunity to take their families around and show them their workplaces while enjoying a diverse program of events. One of the highlights involved watching various car models, like the new Audi Q5, being driven up a 12-meter high ramp with a gradient of 30 degrees. Other main attractions were a demonstration of a victim being rescued by plant safety officers from a crashed car and the simulation of a car crashing into a wall at 60 kilometers per hour. But the real highlight of the event, drawing crowds of many tens of thousands, were motorsports demonstrations of the Audi DTM racing cars and the legendary Le Mans winning Audi R10 TDI on a two-kilometer circuit.

AUDI IN SOCIETY

Establishment of the “Regional Management Initiative for the Ingolstadt Region (IRMA)” In early April last year, the “Regional Management Initiative for the Ingolstadt Region” pro- posed by the Board of Management of AUDI AG entered the official register of societies and associations. The goal of this public-private partnership between businesses and public-sector bodies is to develop the economy, education and quality of life in the region around Audi’s Ingolstadt headquarters, and to raise its profile in the public’s perception. The association is chaired by Dr. Werner Widuckel, Member of the Board of Management for Human Resources at AUDI AG. The first official acknowledgement of the initiative’s merits came in October 2008 when Upper Bavaria’s head of government presented the association with confirmation of funding worth more than EUR 0.5 million. The creation of this regional management body stems from many years of preparatory work performed by AUDI AG at its Ingolstadt location to promote integration between the Company, the city and the surrounding districts. The overriding principle of bringing public and private sector activities together in and around Ingolstadt in order to enhance the appeal of the region located between Munich and Nuremberg was systematically implemented in IRMA’s Articles of Incorporation and Bylaws.

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Research partnerships A fifth partnership between the Audi Group and a university was launched at the Ingolstadt site in 2008. Called INI.KU (Ingolstadt Institutes of the Catholic University of Eichstätt-Ingolstadt), it promotes research projects in the fields of humanities, social sciences and economics. One result of the close partnership between the Company and the research world was the hosting of the fourth doctoral students conference “Pro.Motion” in June of last year, during which young researchers were able to present the current status of their projects. The research areas spanned such topics as lightweight construction, aerodynamics, suspension control systems, production and logistics, electronics and software, and vehicle safety. These conferences provide a vital forum not only for technical discussions among doctoral students but also for employees and management of the Audi Group. Within the Audi Group, some 120 research students are currently preparing their doctoral theses. 80 of these doctoral projects are being carried out in partnership with universities. With a view to promoting young talent, the Company offers two different doctoral student programs, each running for three years. Furthermore, the Audi Group promotes interaction between academia, schools and the public. Throughout the past year, some 300 students and teachers from high schools in Ingolstadt took part in a youth educational forum; a series of events staged in tandem with the Friedrich- Alexander University of Erlangen-Nuremberg (INI.FAU). Over the past year, around 1,500 guests have attended 13 public colloquiums of the research partnerships INI.TUM (Ingolstadt Insti- tutes of the Technical University of Munich) and HIN (Neckarsulm University Institutes: Technical University of Karlsruhe and University of Stuttgart).

AUDI GROUP PARTNERSHIPS WITH UNIVERSITIES

Ingolstadt location Neckarsulm location Other partner universities

• INI.KU – Ingolstadt Institutes • HIN – Neckarsulm University • EBS – European Business School, of the Catholic University of Institutes: Technical University Oestrich Winkel Eichstätt-Ingolstadt of Karlsruhe and University of Since 2007; focus: Since 2008; focus: Stuttgart Human Resources Management Human Resources, Management, Since 2005; focus: and Business Administration Procurement Engines and Lightweight Construction • ALL - Audi Logistics Laboratory, • INI.LMU – Ingolstadt Institutes Technical University of Dortmund of Ludwig-Maximilian University Since 2007; focus: of Munich Logistics Since 2008; focus: Human Resources, Marketing, • Audi Lab for Market Research – Sales University of St. Gallen Since 2006; focus: • INI.FAU – Ingolstadt Institutes Market Research of Friedrich-Alexander University Győr location of Erlangen-Nuremberg (AUDI HUNGARIA MOTOR Kft.) Since 2006; focus: Information Technology and • Audi Hungaria Chair of Internal New Materials Combustion Engines – SZE Győr Since 2008; focus: • IAF – Institute for Applied Engine Manufacturing and Research, Ingolstadt University Technology of Applied Science Since 2004; focus: • AHI – Audi Hungaria Institutes: Development and Production Technical University of Budapest and SZE Győr • INI.TUM – Ingolstadt Institutes Since 2006; focus: of the Technical University of Engines and Production Munich Since 2003; focus: Driving Analysis, Simulation

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ENVIRONMENTAL ASPECTS Management Report 128 Business and underlying situation Environmental mission statement 128 The Group As a globally operating company, the Audi Group actively embraces social responsibility. This 131 Corporate steering 134 Research and development includes, in particular, the principle of sustainable management, which forms an integral part 136 Employee matters of the Audi Group strategy. With its many technological innovations and efficient resource man- 139 Audi in society 141 Environmental aspects agement, the Company is contributing to major advances in protecting the environment and 147 Economic environment proudly bears the European Union’s symbol of environmental excellence (EMAS validation). 150 Course of business 157 Financial performance On the basis of these ongoing efforts to reconcile economics with ecology, customers can rest 159 Net worth assured that environmental compatibility ranks right alongside safety, quality and durability as 160 Financial position 160 Report on post-balance sheet a core aspect in the development and production of every vehicle. date events 161 Risk report 165 Report on expected Location-based environmental protection developments The Audi Group is a pioneer of location-based environmental protection in the automotive 169 Disclaimer industry both in Germany and abroad. In addition to organizational measures within its environmental management systems, pioneering technologies are being used to steadily reduce pollution at all its locations. Regular internal reviews and external auditing of all production facilities bear witness to these continuous efforts. All AUDI AG locations have been accredited in accordance with the EU Eco-Management and Audit Scheme (EMAS). In 1995, the Company became the first premium-segment carmaker to be awarded this prestigious certification for its Neckarsulm location. Ingolstadt was accredited in 1997, with the Hungarian plant at Győr following suit two years later. The Belgian manufacturing plant in Brussels has been EMAS certified since 2002. In addition, the Ingolstadt and Győr manufacturing plants are certified according to the worldwide DIN EN ISO 14001 standard.

Resource efficiency and emissions reduction Using resources efficiently is one of the main priorities of location-based environmental protection. Above all, this includes saving energy and therefore preventing emissions. As in previous years, the total energy consumption of the Audi Group was kept stable in 2008, despite the increase in vehicle production.

DEVELOPMENT IN OVERALL ENERGY CONSUMPTION, VEHICLE AND ENGINE MANUFACTURING BY THE AUDI GROUP 1)

2005 2006 2007 2008

2,800 2,400 2,000 1,600 1,200 800 400 0 Vehicle manufacturing 2) (thousand units) 765 826 867 953

Engine manufacturing 1,695 1,896 1,916 1,902 (thousand units)

Total energy consumption 2,139 2,156 2,193 2,337 (GWh)

1) Ingolstadt, Neckarsulm, Brussels (from 2008), Győr and Sant’Agata Bolognese plants

2) excluding Audi A4 Cabriolet, Audi S4 Cabriolet, Audi RS 4 Cabriolet, Audi Q7, VW Polo

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Whether for manufacturing plants and buildings, infrastructure measures or logistics arrangements, the energy savings potential is identified and exploited as early on as the planning phase. In doing so, it is very important to continue improving the efficiency of manufacturing facilities and utilities. Technological solutions like the use of district heating, heat recovery systems and a state-of-the-art cogeneration plant in Ingolstadt have already been in place within the Audi Group for many years now. Another example of how resources can be preserved is the use of innovative spot welding, laser welding and bonding techniques to minimize the consumption of operating materials and energy. The changeover from pneumatic welding tongs to a version powered by electric motors has yielded a significant efficiency gain and improved the quality of weld points. For an identical

process, the generated energy consumption – and therefore the level of CO2 emissions – of the electric version is around 50 percent lower than for the version using pneumatic welding tongs. Encouraged by the positive findings to date on this progressive technology, the Audi Group has decided to adopt it for all new projects. The focus of all environmental protection efforts is to gradually reduce consumption of power, natural gas, compressed air and water through organizational and technical measures such as waste water treatment plants and modern engine test rigs with energy recovery. 2008 saw the beginning of Phase 2 of a pilot project between AUDI AG and the Technical Univer- sity of Munich to recycle the raw material nickel used in a pretreatment stage of the painting process. The goal of the research partnership is to return this resource to the manufacturing process, thereby significantly reducing the amount of waste. Another pilot project within the Audi Group concerns the biological treatment of rinsing effluent from the paint shop, again with the aim of reducing the volume of waste. Potential studies that incorporate both economic and ecological aspects are also currently being conducted to assess the feasibility of further energy savings within the Audi Group. These studies include the more extensive use of district heating and the tapping of renewable energy sources such as geothermal energy.

Environmental protection programs and public relations work One way in which the Audi Group exercises its social responsibility is through its extensive involvement in numerous environmental protection programs and initiatives. One such major partnership is the Bavarian Environmental Pact between the State of Bavaria and the Bavarian industry. The aims of this collaboration are to promote innovation and achieve environmentally acceptable economic growth, bearing in mind the need for sustainability. As a founding member, the Audi Group has been playing an active role for many years now in the various working forums that meet to consider ideas like an Integrated Product Policy (IPP) or management systems. According to the IPP principle, the Audi Group adopts a holistic view of all phases of the product life cycle; from raw materials extraction to disposal. The Audi Group also routinely integrates suppliers into the sustainable manufacturing process. Furthermore, through its participation in the joint ventures Gesellschaft zur Altlastensanierung in Bayern mbH (GAB mbH), Munich, and Sonderabfall-Entsorgung Bayern GmbH (GSB GmbH), Baar-Ebenhausen, the Audi Group has shown its solidarity in helping with the remediation of industrial legacy contamination at sites where owners can either no longer be called to account or are no longer solvent. In this way, the Company assumes active responsibility for the environmentally acceptable handling of toxic waste. The Audi Group has also maintained close contact with universities and research establishments for many years. In this connection, it is running several environment-related projects and holds various fact-finding events for students. The Audi Group maintains a lively dialog with the public on the subject of environmental protection by conducting regular environmental discussions and neighborhood dialogs with representatives of government agencies, unions, federations, local politicians and the press. The Company offers all interested parties special tours on the theme of environmental protection and sustainability.

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Emissions trading Management Report Climate change and energy efficiency are the key environmental issues of our time. In intro- 128 Business and underlying situation ducing the CO2 emissions trading scheme in 2005, the European Union assumed a pioneering 128 The Group role in matters of climate protection. 131 Corporate steering 134 Research and development Following the expiration of the first trading period (2005 to 2007), the second trading period 136 Employee matters for the CO2 emissions trading scheme (2008 to 2012) began last year. The Ingolstadt, 139 Audi in society 141 Environmental aspects Neckarsulm and Brussels manufacturing plants are participating. The emissions certificates 147 Economic environment were applied for punctually and have already been issued. 150 Course of business 157 Financial performance As it stands now, thanks to the early adoption of measures to improve energy efficiency and the 159 Net worth targeted reduction of emissions, once again the Audi Group does not expect to incur any costs 160 Financial position 160 Report on post-balance sheet from emissions trading in the second trading period. date events 161 Risk report 165 Report on expected Product-based environmental protection developments The Audi Group has been methodically using new technologies to boost vehicle efficiency ever 169 Disclaimer since the early 1980s, thereby living up to its claim of technological leadership. Many of its trailblazing innovations are now also being used by many other carmakers to improve fuel efficiency and cut CO2 emissions by vehicles:

THE AUDI BRAND’S MILESTONES IN EFFICIENCY TECHNOLOGY

• Launch of TDI clean diesel in Audi Q7 • Launch of automatic start/stop

• Vienna-Basel efficiency run in Audi A4 2.0 TDI production model • Audi Mileage Marathon, USA, with Audi TDI vehicles

• 1st win for Audi R10 with 12-cylinder TDI engine in 24 Hours of Le Mans • Launch of Audi valvelift system (AVS)

• Launch of Audi S tronic

• Launch of FSI technology

• Four-door, three-liter vehicle: Audi A2 1.2 TDI

• Volume-produced vehicle with all-aluminum body: Audi A2

• Launch of Audi Space Frame (ASF)

• Launch of TDI technology • Audi duo hybrid model

• Audi 100 achieves impressively low Cd of 0.30

19821989 1994 1999 2002 2006 2009 20012003 2008

Audi design – timeless and aerodynamic Aerodynamic bodies and the lower drag they produce have a major impact on a vehicle’s fuel consumption. Audi Group developers have factored this in by coming up with strikingly sporty designs that also produce less drag. The Audi 100 and its drag coefficient of 0.30 caused quite a sensation as far back as 1982.

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Today, all prototypes undergo more than 1,000 hours of testing in the wind tunnel. Since a vehicle’s underbody contributes to as much as 40 percent of the total drag, an aerodynamic underbody – a system of aerodynamically effective underbody components – was designed. This is now used in all current Audi models, thereby reducing fuel consumption. The new Audi Q5’s low drag coefficient of 0.33 is the latest example of just how valuable this important work is.

TDI and TFSI technology – powerful and economical About 50 percent of the fuel’s energy is lost in a vehicle’s internal combustion engine. Develop- ing powerful but economical engines is therefore one of the most obvious ways to enhance fuel efficiency and reduce emissions. In 1989, the Audi Group’s engineers made ground-breaking progress in this field. For the very first time, diesel direct injection featuring fully electronic control was combined with turbocharging in a production model – a move that paved the way for today’s ultra-efficient diesel engines. The effectiveness of modern TDI technology was showcased to stunning effect in 2006 when the Audi R10 TDI became the first diesel racing car in the world to win the 24 Hours of Le Mans – and then repeated this feat in 2007 and 2008. TDI clean diesel technology, which involves injecting an aqueous ammonia solution into the exhaust system, will go into production in 2009. Since this technology almost completely elimi- nates nitrogen oxides, the engine already meets limit values of both the Euro 6 standard, which doesn’t come into effect until 2014, and the Californian ULEV II BIN 5 emission standard, currently the world’s toughest. The advent of evolutionary FSI technology in 2002 represented a major landmark in gasoline engine technology. In combination with turbocharging (TFSI) and controlled valve lift (Audi valvelift system) – two technologies that increase torque and output, and enhance fuel efficiency – today’s modern gasoline engines have become synonymous with superlative pulling power and maximum efficiency.

Audi Space Frame (ASF) – safe and light A prerequisite for a vehicle using fuel efficiently is reduced weight. In 1994, the advent of the Audi Space Frame (ASF) revolutionized lightweight automotive construction. Thanks to the high-strength, all-aluminum body, it has a significant weight advantage over conventional steel bodies and therefore a built-in advantage when it comes to enhancing fuel efficiency and reducing emissions. For instance, the weight difference for the Audi A8 luxury sedan is in the order of 140 kilograms. With the introduction of its sporty Audi TT in 2006, the Audi Group unveiled a further development in its progressive aluminum technology. Using state-of-the-art manufacturing methods, this vehicle body is a hybrid structure comprised of both steel and aluminum.

Audi S tronic – sporty and efficient In order to more effectively exploit the fuel potential of its thrifty TDI and TFSI engines, the Audi Group has also broken new ground in transmission technology. 2003 was the year that saw the Audi S tronic dual-clutch transmission go into production. This enables gear changes to be performed with virtually no detectable interruption to the power flow, and the low engine speeds and shorter shifting times add up to exceptionally economical road performance. The new seven-speed S tronic dual-clutch transmission has been on the market since 2008. With its impressive efficiency and intelligent control function in automatic mode, it allies the accus- tomed sportiness of an Audi with even greater economy.

Efficiency – the sum of all parts Trendsetting innovations such as those described above have helped the Audi Group produce impressively efficient vehicle concepts in the past. For example, the Company went into volume production as early as 2001 with the Audi A2 1.2 TDI, a four-door, three-liter (referring to fuel consumption per 100 kilometers) car.

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The same holds true today. All efficiency technologies – both those already developed and those Management Report in the pipeline – are available to the Company’s complete product portfolio through the modular 128 Business and underlying situation efficiency program, thereby helping to improve fuel efficiency and cut CO2 emissions in all Audi 128 The Group brand vehicles. 131 Corporate steering 134 Research and development 136 Employee matters 139 Audi in society AUDI’S MODULAR EFFICIENCY PROGRAM 141 Environmental aspects 147 Economic environment 150 Course of business 157 Financial performance 159 Net worth 160 Financial position 160 Report on post-balance sheet date events 161 Risk report 165 Report on expected developments 169 Disclaimer

1) from 2009

The latest-generation Audi A4 is yet another example of how successfully all these measures can be combined. For instance, thanks to cutting-edge diesel technology used for its powerful 88 kW (120 hp) engine, the A4 2.0 TDI sedan achieves an average consumption of 5.1 liters of diesel fuel per 100 kilometers. The CO2 emissions of this front-wheel-drive manual model are an excellent 134 g/km. Developments in the field of gasoline engines are no less impressive. The current Audi A4 2.0 TFSI with manual transmission and front-wheel drive has achieved a notable reduction in average CO2 emissions by almost one quarter compared with the Audi A4 1.8 T from the year 2000 – even though its power output has been increased by up to 20 percent.

INCREASED EFFICIENCY AS ILLUSTRATED BY THE AUDI A4 SEDAN

Audi A4 (B6) Audi A4 (B7) Audi A4 (B8) Audi A4 (B8) 1.8 T 1.8 T 1.8 TFSI 2.0 TFSI

2000 2004 2007 2008

Output 110 kW (150 hp) 120 kW (163 hp) 125 kW (170 hp) 132 kW (180 hp) + 20 %

Torque 210 Nm 225 Nm 250 Nm 320 Nm + 52 %

CO2 emissions, combined 199 g/km 197 g/km 169 g/km 154 g/km -23 %

Such notable improvements in efficiency have also been achieved in other car lines as well. For example, improvements made to the Audi A3 and Audi A6 models last year have seen their average fuel efficiency enhanced by up to 15 percent compared with their respective predecessors.

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Furthermore, with its e models, the Audi brand has been able to offer its customers a particularly attractive way to travel, which is not only dynamic but also easy on the environment. These include the 77 kW (105 hp) Audi A3 1.9 TDI e and the 100 kW (136 hp) Audi A6 2.0 TDI e. With an average consumption of 4.5 and 5.3 liters of diesel fuel over 100 kilometers respectively,

these vehicles achieve impressively low CO2 emissions of 119 and 139 g/km respectively. What’s more, a large number of Audi models – from the Audi A3 1.4 TFSI to the sporty Audi TTS Roadster and the new Audi Q5 3.0 TDI – already comply with Euro 5 emissions legislation that will not come into effect until September 1, 2009.

The driver’s crucial role A person’s individual driving style affects the fuel efficiency and emissions of a car by as much as 30 percent. That means that a driver is just as critical to the overall concept as the vehicle’s technology. Innovative gearshift indicators, which already come as standard in the e models, indicate how overall fuel efficiency can be increased. These techniques will be refined in all of the Audi brand’s car lines over the next few years in an effort to actively coach the driver. The efficiency runs held in summer 2008 were an impressive demonstration of what can be achieved with the existing technology already available as standard on every Audi brand vehicle. 11 teams completed the 1,650 kilometer circuit between Basel and Vienna in normal production versions of the Audi A4 2.0 TDI without having to stop to refuel. The winners achieved an average fuel consumption of 3.32 liters of diesel per 100 kilometers, easily undercutting these

vehicles’ standard consumption of 5.1 liters. That equates to outstandingly low CO2 emissions of 88 g/km.

The prospects of the Audi brand for sustainable mobility Diesel and gasoline engines will remain the bedrock of vehicle drive systems in the coming years. In order to further realize improvements in the fuel efficiency and emissions figures of cars in the short term, continued optimization of these drive concepts will be of key importance. For this purpose, the Audi Group systematically implements the technologies of its modular efficiency program. The Company vividly demonstrated its potential at the Paris Motor Show in the near-production efficiency study Audi A4 TDI concept e. Equipped with an 88 kW (120 hp) 2.0-liter TDI engine and a wide array of specific features, such as automatic start/stop and new thermo-management, this car covers 100 kilometers on an average of just 3.99 liters of diesel

fuel. That represents CO2 emissions of just 105 g/km.

Over the medium term, alternative fuels and drive systems will be developed to complement classic drive concepts. The Audi Group has already been using the ultra-pure diesel fuel GTL (gas-to-liquid) in the Audi R10 TDI diesel racing car for a number of years now, and is manufacturing this fuel jointly with a venture partner. The starting material is natural gas and the diesel fuel obtained not only generates much less pollution than conventional diesel, there is the

added benefit that CO2 emissions along the entire manufacturing chain are reduced by five percent. The Company and its partners are also working hard on BTL (biomass-to-liquid) tech-

nology, which is currently in a pilot phase. This harbors the potential of cutting CO2 emissions by as much as 95 percent. Although such fuels will only be able to cover a small portion of the overall demand in the foreseeable future, they will help to unlock alternatives that do not compete with food production and meet all the performance requirements of modern engines.

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The Audi Group already performed crucial pioneering work in alternative drive concepts back Management Report in 1989, when it developed the Audi Hybrid duo. The Company took the wraps off yet another 128 Business and underlying situation version to incorporate innovative hybrid technology when it presented the Audi A1 Sportback 128 The Group concept study car last fall. Based on the ultra-efficient 1.4-liter, 110 kW (150 hp) TFSI engine, 131 Corporate steering 134 Research and development the result was a plug-in hybrid with lithium-ion energy accumulator sufficient for driving up to 136 Employee matters 100 kilometers exclusively in electric mode. For all its sporty performance and acceleration from 139 Audi in society 141 Environmental aspects 0 to 100 km/h in just 7.9 seconds, the concept vehicle on average needs only 3.9 liters of pre- 147 Economic environment mium gasoline per 100 kilometers. That is equivalent to CO2 emissions of 92 g/km. 150 Course of business 157 Financial performance The production launch of a hybrid model with lithium-ion battery is scheduled for late 2010: 159 Net worth the Audi Q5 Hybrid. Using the Audi technology of the modular longitudinal platform, this con- 160 Financial position 160 Report on post-balance sheet cept will then be made available to other vehicles in the range and adopted as required. date events Audi Group engineers are also developing other electrification concepts for plug-in hybrids, 161 Risk report 165 Report on expected ranging from the fuel cell to the battery-only electric vehicle. The Company benefits in such developments activities from its close collaboration with the Volkswagen Group. 169 Disclaimer

In order to make traffic flow as efficiently as possible in the future, the Company is also working intensively on advanced traffic guidance systems. The “Travolution” project, which is being implemented in conjunction with the City of Ingolstadt, aims to minimize congestion and frequent braking and accelerating in order to avoid unnecessary CO2 emissions.

Further detailed information on the subject of the environment can be found on the Internet at www.audi.com/environmental-protection and on the Group portal at www.volkswagen-sustainability.com.

ECONOMIC ENVIRONMENT

Global economic situation There was a noticeable slowdown in global economic growth during the course of 2008. With the troubles of the U.S. financial markets worsening during the latter half of the year, the bank- ing industry worldwide fell into a serious crisis, which then spread to the real economy. By the end of 2008, numerous industrial nations were already in recession and, after having initially enjoyed dynamic economic growth, emerging markets in Asia, Latin America and Central and Eastern Europe likewise found themselves sucked into the global economic downturn in late 2008. The high inflationary pressures eased significantly in the latter part of the year as a result of falling raw materials and energy prices. Economic growth in the United States fell sharply in 2008 and the gross domestic product grew marginally by only 1.3 (2.0) percent. Particularly in the second half of 2008, the development of the economy was overshadowed by the financial crisis. Collapsing U.S. stock markets and the resulting loss of wealth colluded with the deteriorating state of the job market to turn the consumer climate sharply negative. Economic activity in Western Europe experienced a downward phase in 2008. Growth in the gross domestic product fell away sharply in many countries, including Italy, Spain and Great Britain. Economic growth for the euro zone reached only 0.9 (2.7) percent. With Germany’s economic growth increasingly dwindling from summer 2008, the economy entered into a recession by the end of the year. Economic growth declined from 2.5 percent in 2007 to just 1.3 percent in 2008. Exports were hit particularly badly as a result of the global economic downturn. Consumer spending remained subdued; at first due to the loss of purchasing power caused by inflation and then due to growing economic uncertainty.

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Economic activity remained positive in most of the Central and Eastern European countries in 2008. However, economic development in Russia experienced an abrupt slowdown in the second half of the year as a result of the financial crisis and falling oil prices. Latin America continued its upward economic trend in 2008, though it lost most of its economic momentum in the second half of the year. Emerging markets in Asia helped to underpin global economic activity in 2008, though they were unable to fully escape the impact of the global downturn. The growth rate in China fell to 9.0 (13.0) percent. India continued to expand, albeit with rather less momentum, and saw growth reach 7.0 (9.0) percent. Economic growth in Japan on the other hand hit -0.4 (2.4) percent due to both a weakened export trade and low domestic demand.

International car market On the back of slower growth in the first half of the year, the global demand for cars slipped considerably in the second half of 2008. The deteriorating underlying economic situation caused auto markets in many major industrial nations to experience a sharp downturn in sales. The rate of expansion in emerging markets also fell away noticeably during the course of the year and did not suffice to compensate for lost sales in the United States, Japan and Western Europe. As a result, vehicle sales fell worldwide by 5.8 percent to 55.7 million passenger cars. In the United States, the development of the overall car market in 2008 was by and large dominated by the adverse effects of the financial crisis. The erosion of consumer confidence coupled with the squeeze on lending for vehicle financing prompted a sharp year-on-year downturn in unit sales by 18.0 percent to 13.2 million units. The overall market for passenger cars in Western Europe (excluding Germany) experienced a substantial drop of 10.1 percent to 10.5 million vehicles. In particular, important high-volume markets tumbled year-on-year by as much as 50 percent during the final months of the year. Registrations of new cars were down in Great Britain by 11.3 percent in 2008 and by 13.4 percent in Italy. The Spanish market contracted particularly dramatically, shrinking by 28.1 percent by the end of the year. Only the French car market approached the prior-year level, falling by just 0.7 percent. By contrast, the car market in Central and Eastern European countries remained buoyant, though there was a distinct loss of momentum towards the end of the year. Vehicle sales in Russia, the region’s most significant car market, rose by 15.5 percent to 2.7 million units. In South America, the upward trend in the Brazilian auto market continued and passenger car sales exceeded the previous year’s record by 11.0 percent to reach 2.2 million vehicles. The overall car market in Argentina grew by 6.6 percent to 428,000 units. The rate of growth in the Asia-Pacific region dwindled during 2008. With sales totaling 14.7 million passenger cars, the overall volume was only 2.3 percent up on the prior-year figure. The Chinese car market weakened, most particularly due to higher fuel prices, so that the high growth rates experienced in previous years could not be repeated. With sales of passenger cars reaching 5.5 million units, year-on-year market growth in China only reached 7.8 percent. The slowdown in India was more pronounced, where the car market grew by just 2.1 percent to around 1.2 million vehicles. In Japan, the car market remained as weak as it had been in the previous year. The volume of new car registrations fell by 3.9 percent to 4.2 million vehicles.

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German car market Management Report Expectations that the situation in the German auto market would improve were not met in 2008 128 Business and underlying situation and compared with the previous year’s already low level, new car registrations declined by a 128 The Group further 1.8 percent to a total of 3.1 million units. The various factors serving to depress sales 131 Corporate steering 134 Research and development included, in particular, the at times highly inflated fuel prices and protracted consumer uncer- 136 Employee matters tainty due to the repeated postponement of the road tax reform. In the second half of the year, 139 Audi in society 141 Environmental aspects consumer reticence was exacerbated by the deepening financial crisis and concerns about the 147 Economic environment consequences of an economic downturn, which led to drastic falls in new registrations in the 150 Course of business 157 Financial performance final months of the year. 159 Net worth The diesel share of total first-time registrations fell by 3.6 percentage points to 44.1 percent in 160 Financial position 160 Report on post-balance sheet the year under review. date events Vehicle exports by German manufacturers in 2008 were considerably affected by downward 161 Risk report 165 Report on expected market trends in key sales markets. Car exports fell by 4.0 percent to 4.1 million units. The developments principal export region of other Western European countries accounted for sales of 2.4 million 169 Disclaimer passenger cars, 8.9 percent down from the previous year. The continuing crisis on the U.S. automobile market severely inhibited exports to the United States. The export volume of German manufacturers fell by 5.3 percent to 522,000 passenger cars. On the back of lower demand for cars both domestically and abroad, manufacturing output by German carmakers fell by 3.2 percent to 5.5 million passenger cars in 2008. As a result, the previous year’s record figure was not met. At 5.3 million units, the number of German-branded cars built abroad was down 0.6 percent on the previous year.

Management’s overall assessment The economic environment for the automotive industry deteriorated with unprecedented speed and by an unexpected degree in 2008. Whereas the cost pressure continued to rise in the first half due to escalating energy and raw materials prices, the financial crisis spread to the real economy in many major auto markets as the year progressed, prompting a massive slump in demand. Even in previously fast-growing emerging markets, such as China and Russia, the car boom for now was brought to a halt. In recent years, the Audi Group has implemented extensive strategic measures to safeguard and further strengthen its long-term competitiveness. One area on which it has focused is permanently improving productivity by steadily refining its own product, process and cost management. The systematic refinement of the Audi Production System has played an important role here. Another major pillar of Audi’s strategy is the methodical, long-term expansion of its product portfolio. The fresh, attractive model range featuring modern engines is a vital ingredient to its market success. The effectiveness of the measures taken by the Audi Group became fully apparent amid the difficult economic conditions of the year under review. As a whole, the 2008 fiscal year saw manufacturing output, deliveries, revenue and profit reach new record levels. Only as the economic crisis worsened in the fourth quarter of 2008 was the Audi Group no longer able to remain entirely immune to the negative trend in many sales markets.

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COURSE OF BUSINESS

Sourcing Audi Group Purchasing has set itself the core target of establishing long-term partnerships with the world’s top-performing suppliers. In addition to overall economic efficiency, the selection criteria of reliability, quality, innovativeness, service and price are particularly relevant. In order to make optimal use of any joint synergy potential, this process is handled in close consultation with Volkswagen Group Sourcing. The cost of materials for the Audi Group in the past fiscal year amounted to EUR 23,430 (23,092) million. This includes all raw materials and consumables used, as well as purchased goods and services.

BREAKDOWN OF THE CONSOLIDATED COST OF MATERIALS BY GROUP COMPANY

16.3 % Other Group companies

3.1 % AUDI BRUSSELS S.A./N.V. 65.0 % AUDI AG

15.6 % AUDI HUNGARIA MOTOR Kft.

Sourcing activities had to cope with persistently high price levels in the first half of 2008 and extremely volatile raw materials and energy markets in the second half of the year. Despite this adverse climate, Audi Group Purchasing was again able to counteract the financial impact of the past fiscal year thanks to its close cooperation with suppliers, its signing of long-term agreements, and its extensive implementation of hedging strategies. Sourcing will continue to gain strategic importance in the future along with the growing trend towards derivatization in the Audi product portfolio. At the same time, partnerships with the supply industry have been further intensified, so that joint solutions for both conserving materials and for using alternative materials can be identified early on in the product development phase. Alongside purely economic considerations, ecological aspects in particular are taken into account. For example, the recyclability of components is investigated. With a view to gradually strengthening existing ties with the supply industry, the Audi Group regularly holds a variety of events for suppliers. These events provide a platform for informal exchanges and intensive networking. Another important tool is the web-based B2B supplier platform shared with the Volkswagen Group. This platform assures swift communication and an efficient sourcing process to the benefit of both the Audi Group and its suppliers. Audi Group Purchasing, in tandem with the Technical Development Division, provides potential partners with an opportunity to demonstrate how effective and innovative they are at various events such as “TechShows.”

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Production Management Report In the past fiscal year, the Audi Group increased vehicle production by 4.9 percent to 1,029,041 128 Business and underlying situation (980,880) vehicles. This also marked a new all-time record for the Company. The total com- 128 The Group prised 1,026,617 (978,300) vehicles of the Audi premium brand and 2,424 (2,580) supercars 131 Corporate steering 134 Research and development of the Lamborghini brand. 136 Employee matters 139 Audi in society VEHICLE PRODUCTION BY MODEL 141 Environmental aspects 147 Economic environment 2008 2007 150 Course of business Audi A3 57,190 70,744 157 Financial performance 159 Net worth Audi A3 Sportback 146,436 160,171 160 Financial position Audi A3 Cabriolet 18,570 216 160 Report on post-balance sheet Audi TT Coupé 31,101 40,417 date events 161 Risk report Audi TT Roadster 10,688 16,349 165 Report on expected Audi A4 Sedan 210,288 156,281 developments 169 Disclaimer Audi A4 Avant 150,990 129,805 Audi A4 Cabriolet 16,790 23,641

Audi RS 4 Sedan 320 2,401

Audi RS 4 Avant 330 2,191

Audi RS 4 Cabriolet 201 700 Audi A5 Coupé 57,324 25,549 Audi A5 Cabriolet 326 5 Audi Q5 20,324 162 Audi A6 Sedan 154,002 157,645 Audi A6 Avant 52,870 71,945 Audi A6 allroad quattro 10,283 16,340

Audi RS 6 Sedan 454 5

Audi RS 6 Avant 3,326 30 Audi Q7 59,008 77,396 Audi A8 20,140 22,182 Audi R8 5,656 4,125 Total, Audi brand 1,026,617 978,300 Lamborghini Gallardo 1,787 1,951 Lamborghini Murciélago 637 629 Total, Lamborghini brand 2,424 2,580 Total, Group 1,029,041 980,880

531,200 (528,305) vehicles left the production line at the Ingolstadt Group headquarters last year. The highlight events were the production starts of the new Audi S3 Sportback, Audi A4 Avant and Audi Q5 models, together with the product improvement of the Audi A3 car line. Preparation for volume production of the Audi S4 Sedan and Avant was a further significant measure. Production output at the second German manufacturing plant in Neckarsulm rose by 17.2 percent to 327,296 (279,189) units. Priority activities in the past fiscal year were the product improvement of the Audi A6 car line and the start of production of the new Audi A5 Cabriolet and S5 Cabriolet. In 2008, the plant, which possesses unique expertise in aluminum body manufacturing, celebrated 20 years of building luxury-class vehicles ranging from the Audi V8 to today’s Audi A8 with its range-topping versions Audi A8 L, Audi S8 and Audi A8 W12. In its first complete year within the Group, the Belgian plant in Brussels built 31,763 (12,087) models of the Audi A3 car line, as well as 53,177 VW Polos on behalf of Volkswagen AG (Wolfs- burg). The plant is currently making intensive preparations to become the exclusive volume manufacturer of the new Audi A1 beginning in 2010.

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The production halls at AUDI HUNGARIA MOTOR Kft. in the Hungarian city of Győr turned out a total of 60,359 (56,982) vehicles of the Audi brand in 2008. In its first full year of joint production with the Ingolstadt plant, 18,570 (216) units of the Audi A3 Cabriolet were built on behalf of AUDI AG. Production of the ultra-sporty TTS models also commenced last year.

ENGINE PRODUCTION

2008 2007 Audi Group 1,901,760 1,915,633 of which AUDI HUNGARIA MOTOR Kft. 1,900,333 1,913,053 of which Automobili Lamborghini S.p.A. 1,427 2,580

Engine production by the Audi Group in the past fiscal year virtually matched the high tally of the previous year, reaching 1,901,760 (1,915,633) units. The share of diesel engines in the overall total was 47.3 (55.4) percent. The Group subsidiary AUDI HUNGARIA MOTOR Kft. manufactured a total of 1,900,333 (1,913,053) engines in 2008. Of this total, 782,944 (692,521) units were supplied to Audi Group companies, 935,745 (1,073,097) to other Volkswagen Group companies and 119,757 (109,612) to third parties. Along with the model changeover, the Lamborghini Gallardo car line now features modern FSI engine technology, which has already chalked up multiple wins in competition racing. Since it is now using FSI engines built by AUDI HUNGARIA MOTOR Kft., the total number of 10-cylinder engines manufactured by Automobili Lamborghini S.p.A. fell to 790 (1,951). The Italian sports car manufacturer built 637 (629) 12-cylinder engines for the Murciélago car line during the period under review.

AUDI HUNGARIA MOTOR Kft. – 15 years of success in Hungary The 1993 purchase of a production hall in Győr (Hungary) led to the establishment of AUDI HUNGARIA MOTOR Kft., which paved the way for a unique success story that celebrated its 15th anniversary in spring of last year. This wholly owned subsidiary of AUDI AG has since built more than 16 million engines and turns out almost two million units annually, making it one of the most important engine manufacturers in the world. In addition, the range of tasks handled by the Audi Group’s largest location outside Germany has been steadily diversified over the years. In 1998, for example, it branched out into vehicle manufacturing when it began producing the Audi TT Coupé and Roadster, and then broadened its range by adding the new Audi A3 Cabriolet in November 2007. Since the start of vehicle manufacturing operations there, over 400,000 automobiles have left the Hungarian plant. In 2001, an engine development center was added and, in 2004, it opened its own tool-making facilities. AUDI HUNGARIA MOTOR Kft. now employs some 5,900 staff, making it one of Hungary’s leading employers. Furthermore, the company is one of the country’s largest exporters.

Audi Group celebrates 20 years in China In 1988, the Audi Group embarked on a partnership with the present-day Chinese carmaker China FAW Group Corporation for the local manufacture of Audi vehicles in Changchun (China).

Since that time, the brand with the four rings, which currently assembles the Audi A4 L and

Audi A6 L models there, has emerged as the most successful premium brand in the Chinese market, delivering in excess of 100,000 vehicles each year. In order to realize its ambitious growth target of delivering 200,000 vehicles a year by 2015, the cornerstone for a new assembly hall was laid as part of its anniversary festivities. What’s more, the Company unveiled plans to build the new Audi Q5 at the Chinese plant.

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New Audi A4 goes into production in India Management Report In the fall of 2008, a second model was added to local assembly in India: the new Audi A4. 128 Business and underlying situation Just like the Audi A6, the vehicle is shipped to India as sets of parts (CKD) and assembled in 128 The Group Aurangabad on the premises of ŠKODA AUTO INDIA PRIVATE LIMITED in an exclusive zone 131 Corporate steering 134 Research and development that conforms to AUDI AG quality standards. 136 Employee matters The Audi brand is planning to build a total of over 18,000 cars in this important growth market 139 Audi in society 141 Environmental aspects by 2015, including around 11,000 Audi A4 models. In order to do so, the Company will invest 147 Economic environment over EUR 30 million in the location over the next few years. Around 50 workers are currently 150 Course of business 157 Financial performance employed there on the Audi CKD assembly line. 159 Net worth 160 Financial position 160 Report on post-balance sheet Deliveries and distribution date events In the wake of the financial crisis and its negative repercussions for the real economy, the de- 161 Risk report 165 Report on expected mand for cars in many sales markets experienced a dramatic collapse towards the end of last developments year. Despite this extremely difficult environment, the Audi Group increased its deliveries world- 169 Disclaimer wide by 1.9 percent in the past fiscal year to 1,223,506 (1,200,701) vehicles. The Audi core brand performed particularly well. Thanks to a fresh, attractive product range and modern engines, deliveries reached 1,003,469 (964,151) vehicles, surpassing the prior-year tally by 4.1 percent. That made 2008 the 13th record-breaking year in a row for the brand with the four rings, which delivered over one million premium cars for the first time in its history.

AUDI VEHICLE DELIVERIES – LARGEST MARKETS

Deliveries to Year-on-year customers Year-on-year percentage change 2008 market 2008 percentage change in overall market share, percent Audi worldwide 1,003,469 4.1 Germany 258,111 1.6 – 1.8 8.1 China (incl. Hong Kong) 119,598 17.3 7.8 2.2 Great Britain 101,522 0.8 – 11.3 4.7 USA 87,760 – 6.1 – 18.0 0.7 Italy 62,053 5.0 – 13.4 2.8 Spain 51,421 – 12.6 – 28.1 4.2 France 51,200 7.7 – 0.7 2.3 Belgium 30,000 12.5 2.1 5.1 Netherlands 18,234 9.0 – 1.1 3.4 Austria 17,370 9.5 – 1.5 5.6 Switzerland 17,137 9.9 1.4 5.9 Russia 17,076 13.8 15.5 0.6 Japan 15,800 4.3 – 3.9 0.4 Sweden 15,597 0.8 – 17.3 5.8 South Africa 9,525 – 21.6 – 24.3 2.9

In its home market Germany, the Audi brand performed particularly well despite an overall market that contracted by 1.8 percent. The number of new vehicles delivered to customers during the period under review reached 258,111 (254,014), thereby actually improving upon the prior-year total by 1.6 percent. The Company achieved a market share of 8.1 (7.9) percent, its highest ever as a premium manufacturer. The most important growth drivers were most notably the Audi A4 car line, which saw the arrival of the new Audi A4 Avant in the early part of last year, and the Audi A5 Coupé. Even in the Western European markets, some of which declined quite considerably, deliveries of the Audi brand increased by a total of 3.1 percent to 408,873 (396,393) premium cars. Though the brand with the four rings was unable to completely escape the devastating 28.1 percent slump in the Spanish car market, vehicle deliveries in the depressed car markets of France and Italy bucked the market trend with healthy growth rates of 7.7 and 5.0 percent respectively. And despite the 11.3 percent downturn in Great Britain as a whole, deliveries of 101,522 (100,712) vehicles held steady at the previous year’s high level.

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The Audi brand was able to maintain the growth of recent years in Eastern Europe. For example, in Russia – the region’s key market – 17,076 (15,007) vehicles were handed over to customers, an increase of 13.8 percent. The Audi brand also achieved high growth rates again in the Asia-Pacific region. In China (including Hong Kong), the largest foreign market, the 17.3 percent increase in deliveries to 119,598 (101,996) vehicles easily outstripped the performance of that market as a whole. Disregarding sales in Hong Kong, the Audi brand delivered 118,118 (100,888) cars. The brand with the four rings was thus able to cement its leading position in the Chinese premium segment once again last year. The U.S. auto market was particularly hit by spillover from the financial crisis during the period under review. Even though overall demand tumbled by 18.0 percent, the Audi brand was very successful in keeping the downturn in deliveries disproportionately small to 6.1 percent, selling a total of 87,760 (93,506) units. The advent over the course of this year of the new Audi Q5 and the ultra-efficient diesel technology is expected to provide vital stimuli for demand in the United States.

DELIVERIES TO CUSTOMERS BY MODEL

2008 2007 Audi A3 59,183 71,701 Audi A3 Sportback 150,221 159,148 Audi A3 Cabriolet 13,678 156 Audi TT Coupé 32,003 38,745 Audi TT Roadster 11,817 13,026 Audi A4 Sedan 207,830 157,258 Audi A4 Avant 142,046 136,135 Audi A4 Cabriolet 16,399 23,819

Audi RS 4 Sedan 321 2,408

Audi RS 4 Avant 333 2,193

Audi RS 4 Cabriolet 201 704 Audi A5 Coupé 54,272 18,553 Audi Q5 9,034 – Audi A6 Sedan 150,589 149,026 Audi A6 Avant 55,400 69,567 Audi A6 allroad quattro 11,289 15,622

Audi RS 6 Sedan 452 –

Audi RS 6 Avant 3,320 – Audi Q7 59,458 81,775 Audi A8 20,159 21,362 Audi R8 5,016 2,952 Internal vehicles before launch 448 1 Total, Audi brand 1,003,469 964,151 Lamborghini Gallardo 1,844 1,793 Lamborghini Murciélago 586 613 Total, Lamborghini brand 2,430 2,406 Other Volkswagen Group brands 217,607 234,144 Total, Group 1,223,506 1,200,701

A3 car line The market launch of the new Audi A3 Cabriolet in the early part of last year marked the introduction of another attractive model to the Audi A3 car line. In addition, the ultra-sporty Audi S3 has for the first time been available in a Sportback version since July. Again in July, the Company unveiled the Audi A3 and A3 Sportback models featuring an even more expressive exterior design and numerous new technological features. Thanks to further improvements in engine technology, average fuel efficiency was improved by 15 percent compared with the previous model. Furthermore, the Audi A3 1.9 TDI e with powerful 77 kW (105 hp) engine offers customers particular efficiency. Its combined-cycle fuel consumption is an excellent 4.5 liters of diesel per

100 kilometers, which equates to CO2 emissions of just 119 g/km. A total of 223,082

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(231,005) vehicles from this popular premium compact model line were delivered to customers Management Report in the past fiscal year. 128 Business and underlying situation 128 The Group TT car line 131 Corporate steering 134 Research and development The Audi TT car line was further expanded in the past year. In addition to the very high- 136 Employee matters performance versions Audi TTS Coupé and Audi TTS Roadster, both models are available with 139 Audi in society 141 Environmental aspects a 1.8 TFSI entry-level engine version. The four-cylinder gasoline engine with turbocharging and 147 Economic environment direct injection is rated at 118 kW (160 hp) and achieves an impressive combined-cycle fuel 150 Course of business 157 Financial performance consumption of just 6.7 and 6.9 liters of premium fuel per 100 kilometers respectively in the 159 Net worth Audi TT Coupé and Roadster. Its CO2 emissions are 155 and 159 g/km respectively. The Audi 160 Financial position 160 Report on post-balance sheet brand has also made its ultra-efficient TDI technology available in a production sports car for date events the very first time in the guise of the 2.0-liter TDI engine. The average fuel consumption of 161 Risk report 165 Report on expected the Audi TT Coupé 2.0 TDI quattro with 125 kW (170 hp) engine is an outstanding 5.3 liters developments of diesel fuel per 100 kilometers. This corresponds to CO2 emissions of 139 g/km. In all, 169 Disclaimer 43,820 (51,771) Audi TT models were delivered to customers in the reporting period.

A4 car line The new Audi A4 Avant debuted on the market in April 2008. Like the new Audi A4 Sedan before it, this sporty midsize station wagon can be equipped with a comprehensive package of assistance systems adopted from the full-size category. Other impressive qualities are its unique design and new, efficient powertrain versions that achieve an average improvement in fuel efficiency of 14 percent compared with its predecessor model. The Audi brand presented a particularly impressive example of the fusion between performance and efficiency when it unveiled its two sporty versions Audi S4 and Audi S4 Avant, which will appear on markets this spring. Both models have a completely new three-liter V6 engine with gasoline direct injection. The 3.0-liter TFSI engine has an output of 245 kW (333 hp) and a peak torque of 440 Nm and, in combination with S tronic, achieves fuel consumption of 9.4 liters of premium fuel per 100 kilometers in the sedan version and 9.7 liters in the Avant version. Overall, the new Audi S4 outperforms the fuel efficiency of its predecessor model by an average of 26 percent and offers even more dynamic road performance. Its CO2 emissions are 219 and 224 g/km respectively. In addition, a long-wheelbase version of the successful Audi A4 model has been available exclusively on the Chinese market since the end of 2008. This vehicle, which is built locally at the Changchun plant in China, is not only more spacious, but thanks to its special chassis settings that are adjusted to meet local road conditions, it offers superior suspension comfort, thereby meeting the demanding expectations of Chinese customers in the premium segment. This should help to spread the medium-term success of the new Audi A4 in the major growth market China. Deliveries of the successful Audi A4 car line (Sedan, Avant and Cabriolet) reached 366,275 (317,212) units in the past fiscal year, an improvement of 15.5 percent.

A5 car line The Audi A5 Coupé, which acquired further attractive engine versions last year, also enjoyed a great deal of popularity in 2008. The new 2.0 TFSI developing 132 kW (180 hp) is now being offered as an entry-level engine. Thanks to its use of the latest in engine technology, such as the Audi valvelift system (AVS), it is an exceptionally powerful and efficient version. Deliveries of this emotionally charged vehicle, which will also become available as a Cabriolet this year, totaled 54,272 (18,553) in the year under review.

Audi Q5 The range of premium SUV models was expanded in November 2008 with the arrival of the new Audi Q5. Thanks to its ultra-sporty proportions, it maintains the style typical of the Audi brand vehicles and has a low drag coefficient of just 0.33. From its very launch, the new Audi Q5 came available with three powerful gasoline and diesel engines with progressive TFSI and TDI technology. Other technological highlights include the optional seven-speed S tronic dual-clutch transmission and the driving dynamics system Audi drive select. By year-end, the Audi Q5 already had 9,034 new owners.

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A6 car line The Audi A6 car line was further improved last fall. A refined design with striking accents such as the redesigned Audi single-frame grille and the optionally available LED daytime running lights better embodies the character of this successful full-size vehicle. Enhanced chassis characteristics and new high-tech assistance systems further add to the overall driving pleasure. In addition, new, powerful and efficient units have been added to the engine range, and the average fuel efficiency of the entire car line has been increased by around 15 percent overall. One particularly efficient version is the new Audi A6 2.0 TDI e, which achieves average consump-

tion of 5.3 liters of diesel fuel over 100 kilometers and CO2 emissions of 139 g/km. With deliveries of this model reaching 217,278 (234,215) units, the Audi A6 car line (Sedan, Avant and allroad quattro) was not far short of the previous year’s high total.

The Audi RS 6 Sedan has been available alongside the Audi RS 6 Avant since fall of last year. This high-performance vehicle features a newly designed V10 engine with FSI gasoline direct injection and twin turbochargers that generates an output of 426 kW (580 hp), making it both un- compromisingly sporty and eminently suited to everyday use.

Audi Q7 The Audi brand delivered impressive proof last year of just how dynamic and efficient cutting- edge diesel technology can be in the shape of the Audi Q7 car line. The new Audi Q7 V12 TDI quattro is equipped with a six-liter V12 diesel engine rated at 368 kW (500 hp) with an outstanding peak torque of 1,000 Nm. This power unit propels the performance SUV to 100 km/h in 5.5 seconds and is convincingly fuel-efficient, averaging 11.3 liters of diesel per 100 kilome-

ters. This corresponds to average CO2 emissions of 298 g/km.

A8 car line Demand for the Audi A8 luxury sedan over the past fiscal year was able to keep up to the previous year’s excellent level with 20,159 (21,362) units delivered. In addition, the Audi brand offers its customers a combination of sportiness and impressive efficiency in the shape of the Audi A8 2.8 FSI e. With an output of 154 kW (210 hp) and average fuel consumption of

8.3 liters of premium fuel per 100 kilometers, this vehicle achieves excellent CO2 emissions of only 199 g/km.

Audi R8 Halfway through last year, a further technological highlight was added to the equipment range of the thoroughbred Audi R8 mid-engine sports car. For the first time, this model comes available with all-LED headlamps. In addition to equipping the daytime running lights with 24 LEDs per headlamp, light-emitting diodes are now being used for turn indicators as well as for low- beam and high-beam headlamps. Major advantages of the new lighting technology, other than its lower power consumption, include colors akin to natural daylight, which are more agreeable to the human eye. Audi delivered 5,016 (2,952) of its sporty top-of-the-line model in the past fiscal year, making this vehicle one of the most popular in the sports car segment since its market launch in spring 2007.

Supercars of the Lamborghini brand Despite the difficult conditions, the Italian supercar manufacturer Lamborghini also achieved notable success in the past fiscal year. The previous year’s record was broken yet again with a total of 2,430 (2,406) cars delivered. The Gallardo sports car line sold a very satisfactory 1,844 (1,793) units in spite of the model changeover. And, during the same period, 586 (613) of the top-of-the-line Murciélago sports car were handed over to customers.

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Other Volkswagen Group brands Management Report During the fiscal year, 217,607 (234,144) vehicles of other Volkswagen Group brands were 128 Business and underlying situation delivered to customers by the companies VOLKSWAGEN GROUP ITALIA S.P.A. (Verona, Italy), 128 The Group Audi Volkswagen Korea Ltd. (Seoul, South Korea) and Audi Volkswagen Middle East FZE (Dubai, 131 Corporate steering 134 Research and development United Arab Emirates). 136 Employee matters 139 Audi in society 141 Environmental aspects Audi Mileage Marathon: diesel initiative gets under way in the United States 147 Economic environment In the future, the Audi brand will be able to supply U.S. customers with the millionfold tried- 150 Course of business 157 Financial performance and-tested, ultra-efficient TDI technology. 159 Net worth The Audi Mileage Marathon was held there last fall to publicize its launch. Over a 7,800-plus- 160 Financial position 160 Report on post-balance sheet kilometer stretch from New York to Los Angeles, participants were able to discover just how date events powerful and economical this modern drive technology really is. The Audi A3 Sportback 2.0 TDI, 161 Risk report 165 Report on expected Audi A4 Sedan 3.0 TDI, Audi Q5 3.0 TDI and Audi Q7 3.0 TDI clean diesel competed in the effi- developments ciency run, and all 23 cars achieved excellent average fuel consumption. Most efficient of all 169 Disclaimer were the Audi A3 and Audi A4, which averaged just 4.7 and 5.3 liters of diesel fuel per 100 kilometers respectively. The new Audi Q5 performance SUV and the Audi Q7 also turned in excellent performances, averaging 6.1 and 7.1 liters of diesel per 100 kilometers respectively. The Audi Mileage Marathon provided a fitting opportunity for the Audi Q5 and the TDI clean diesel technology in the Audi Q7 to celebrate their debut on American roads. Currently the cleanest diesel technology in the world, TDI clean diesel cuts nitrogen oxide emissions by up to 90 percent, already meeting limit values of both the Euro 6 standard, which is not due to come into effect until 2014, and the Californian ULEV II BIN 5 emission standard, the toughest in the world. The edge that this advanced diesel technology gives over the established gasoline engines currently available in the United States should give that extra boost needed to achieve the kind of growth to which the Audi brand aspires.

FINANCIAL PERFORMANCE

The Audi Group increased its revenue in the 2008 fiscal year by 1.7 percent to EUR 34,196 (33,617) million despite the appreciably more difficult economic environment in the second half of the year and adverse effect of exchange rates. At the same time, this represented the highest total ever in the Company’s lengthy history. Of the total revenue, EUR 25,534 (25,249) million was brought in by sales of vehicles of the Audi brand. As in the previous year, the revenue mainstay was the Audi A4 car line. In addition to the already very popular A4 Sedan, there was high demand particularly for the new A4 Avant, which was gradually introduced into the various markets starting in the spring. The Audi A5 Coupé and the Audi R8 mid-engine sports car continued to drive growth robustly. Revenue realized from sales of vehicles of the A3, TT, A6, Audi Q7 and A8 car lines was down on the previous year’s high level due to their advanced life cycles. The hugely successful new Audi Q5, which only started to appear on the markets as of last November, surpassed all expectations. This vehicle has rapidly emerged as a key source of revenue. The revenue achieved in the 2008 fiscal year by the Italian supercar brand Lamborghini also matched the previous year’s excellent figures.

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The Audi Group also sells vehicles of the Bentley, SEAT, Škoda, VW Passenger Car and VW Commercial Vehicle brands through the sales subsidiaries VOLKSWAGEN GROUP ITALIA S.P.A. (Verona, Italy), Audi Volkswagen Korea Ltd. (Seoul, South Korea) and Audi Volkswagen Middle East FZE (Dubai, United Arab Emirates). Revenue from sales of these vehicle brands in the past fiscal year was below that of the previous year’s high level. As a consequence of the increased business volume, the cost of sales for the Audi Group rose by 1.3 percent in the period under review to EUR 28,848 (28,478) million. Further productivity gains, improved processes and optimized material costs were the main reasons for the disproportionately low increase in cost of sales relative to revenue strained by an unfavorable exchange rate. Overall, the Audi Group enjoyed a notable increase in gross profit of 4.1 percent to an excellent EUR 5,348 (5,139) million. The rise in distribution costs to EUR 3,240 (2,737) million was mainly due to the activities necessitated by the large number of new products and product improvements appearing on the market, and to the increased cost related to covering sales risks. The rise in administrative expenses to EUR 302 (266) million was largely attributable to the first-time consolidation of the companies AUDI BRUSSELS S.A./N.V. (Brussels, Belgium), Audi Zentrum Hamburg GmbH (Hamburg) and Audi Zentrum Berlin-Charlottenburg GmbH & Co. KG (Berlin) in the 2008 fiscal year. The rise in the other operating result of EUR 966 (569) million stemmed predominantly from higher earnings from the settlement of currency hedging transactions. The Audi Group thus improved its operating profit for the past fiscal year overall by 2.5 percent to EUR 2,772 (2,705) million. This highly pleasing development amid such difficult times serves as further proof that the Company is fundamentally sound and competitive. It also confirms the resounding success of its strategy of sustainable, profitable growth. The financial result rose to EUR 405 (210) million in the period under review. This increase is attributable in the first instance to higher interest income and to an improved investment result.

DEVELOPMENT OF PROFIT BEFORE TAX AND RETURN ON SALES BEFORE TAX

2005 2006 2007 2008

3,000 2,000 1,000 0 Profit before tax 1,310 1,946 2,915 3,177 (EUR million)

Return on sales before tax 4.9 6.2 8.7 9.3 (%)

Overall, the Audi Group was able to improve its profit before tax by an impressive 9.0 percent to EUR 3,177 (2,915) million. Its profit after tax was also noticeably up by 30.4 percent to EUR 2,207 (1,692) in the period under review.

KEY EARNINGS DATA

% 2008 2007 Operating return on sales 8.1 8.0 Return on sales before tax 9.3 8.7 Equity return after tax 23.3 21.7 Return on investment 19.8 18.6

The extremely successful business performance is also reflected in all key return ratios for the 2008 fiscal year. The operating return on sales improved from 8.0 percent to 8.1 percent and the return on sales before tax from 8.7 percent to 9.3 percent.

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The return on investment rose from 18.6 percent to 19.8 percent, impressively underscoring Management Report the strong profitability of the Audi Group even in a difficult economic environment. 128 Business and underlying situation 157 Financial performance 159 Net worth 160 Financial position NET WORTH 160 Report on post-balance sheet date events 161 Risk report BALANCE SHEET STRUCTURE 165 Report on expected developments 2005 2006 2007 2008 2008 2007 2006 2005 169 Disclaimer 16,11218,910 22,578 26,056 26,056 22,578 18,910 16,112

8,190 10,328

7,379 8,355

7,536 7,265 1,347 3,347 6,104 946 6,029 8,143 2,661 5,269 8,339 749 4,852 4,610 2,109 9,699 4,202 8,954 454 3,632 2,042 7,035 6,740 2,368 5,806 4,884 4,833

3,105

Fixed assets Equity Other non-current assets Non-current liabilities Inventories Current liabilities Other current assets Cash and cash equivalents

The Audi Group’s balance sheet total grew by 15.4 percent over the past fiscal year to EUR 26,056 (22,578) million. Non-current assets of EUR 9,537 (8,325) million showed a rise on the previous year’s total. This change was prompted in particular by an increase in property, plant and equipment following increased investment activities for new products and the first-time consolidation of AUDI BRUSSELS S.A./N.V. (Brussels, Belgium) at the start of the fiscal year. In addition, higher market values for long-term currency hedging instruments prompted a rise in other financial assets. The rise in current assets to EUR 16,519 (14,253) million is largely attributable to the higher inventories prompted by the downturn in economic activity, and to increased cash and cash equivalents. In the course of further optimizing the investment portfolio, financial resources previously held in the cash pool were converted to term money, resulting in a corresponding drop in cash and cash equivalents, and a rise in other current assets. Total capital investments by the Audi Group were up on the previous year’s high level at EUR 2,486 (2,115) million. Property, plant and equipment accounted for EUR 1,793 (1,527) million of this sum, representing a rise of 17.4 percent.

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The equity of the Audi Group rose by 23.6 percent to EUR 10,328 (8,355) million. This change was attributable principally to the cash infusion of EUR 706 million by Volkswagen AG (Wolfs- burg) to the capital reserve of AUDI AG, and allocation to other retained earnings of the balance remaining after the transfer of profit (EUR 948 million). In addition, equity was increased by EUR 289 million due to the first-time consolidation of AUDI BRUSSELS S.A./N.V. The equity ratio for the Audi Group rose thereby to 39.6 (37.0) percent overall. Non-current liabilities amounting to EUR 6,029 (5,269) million rose year-on-year primarily as a result of increased other provisions, together with higher other liabilities. Current liabilities rose to EUR 9,699 (8,954) million mainly as a result of increased provisions and sales-related growth in trade payables.

OVERALL CAPITAL INVESTMENTS AND CASH FLOW OF THE AUDI GROUP

2005 2006 2007 2008

5,000 4,000 3,000 2,000 1,000 0 Total investments 1,708 1,925 2,115 2,486 (EUR million)

Cash flow from operating 3,252 4,428 4,876 4,338 activities (EUR million)

FINANCIAL POSITION

The cash flow from operating activities by the Audi Group amounted to EUR 4,338 (4,876) million in the past fiscal year. The cash used in investing activities totaled EUR 5,916 (2,494) million in the year under review. The sharp rise is mainly due to the investment of term money with an investment horizon of more than three months. Investments in property, plant and equipment and other intangible assets in the amount of EUR 1,906 (1,578) million were up 20.8 percent from the previous year. The priority capital investments in 2008 were the ramp-ups for production of the new Audi Q5 and new Audi A5 Cabriolet, the product improvements of the Audi A3 and Audi A6 car lines, and the further derivatization of the Audi A4 car line. As in the previous year, cash flow from operating activities covered the investments in non-current assets in full, giving further evidence of the Company’s consistently strong financial position. Net liquidity as of December 31, 2008 was EUR 9,292 (7,860) million, an impressive increase of 18.2 percent over the previous year. As of December 31, 2008, the Audi Group had other financial obligations amounting to EUR 1,501 (1,462) million, mainly in the form of ordering commitments. An overview is provided in Section 39 of the Notes: “Other financial obligations.”

REPORT ON POST-BALANCE SHEET DATE EVENTS

There were no events of material significance after the end of the fiscal year.

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RISK REPORT Management Report THE RISK MANAGEMENT SYSTEM WITHIN THE AUDI GROUP 128 Business and underlying situation 157 Financial performance The goal of the Audi Group’s risk management strategy is to minimize or, if possible, completely 159 Net worth 160 Financial position avoid the risks associated with entrepreneurial activity in order to safeguard the Company 160 Report on post-balance sheet against potential losses and against risks to it as a going concern. date events 161 Risk report To that end, a Company-wide risk management and early warning system is in place within the 161 The risk management system Audi Group. This covers AUDI AG and all its subsidiaries from which risks that could potentially within the Audi Group 161 Economic risks threaten the Audi Group as a going concern could spread. 162 Industry risks The integration of risk management tasks into the individual business processes is organized 163 Risks from operating activities decentrally at the level of the individual corporate divisions and subsidiaries. All task areas as 163 Legal risks well as reporting and documenting obligations for risk management are clearly defined and 164 Personnel risks 164 Information and IT risks regularly monitored to verify that they are up to date. 164 Financial risks Potential risks are identified on the basis of predefined spheres of responsibility. Practical 165 Overall assessment of the risk position measures for steering and overseeing these risks are implemented by the respective officers, 165 Report on expected and the effectiveness of decisions taken is continually monitored. Probabilities are estimated developments 169 Disclaimer for all individual risks. The anticipated potential losses from the risk are then quantified on the basis of the lost profit contribution or the costs incurred. In addition, all necessary measures and precautions are taken to prevent an identified risk from occurring. The Board of Management and the Supervisory Board are regularly informed of all significant risks within the Audi Group. Within the context of its business activities the Audi Group is confronted with various risk areas, which are explained in greater detail below. The individual risks described relate to the planning horizon of 2009 through 2011.

ECONOMIC RISKS

In view of the strong international emphasis of its operations, the Audi Group is highly dependent on international economic conditions. This is particularly true with respect to the important sales markets of Europe, China, the United States and Japan. Following the deepening financial crisis in the latter part of 2008 and its extensive spillover into the real economy, forecasts for global economic growth for the next few years have been scaled back drastically. Whereas economic momentum is expected to be greatly reduced in emerging markets, the two-year forecast for major industrial nations expects anything ranging from stagnation to deep recession. The automotive industry will also be substantially affected. This was already manifested in the second half of the past year in a significant downturn in global demand for cars. Although the Audi Group has been notably successful in holding its ground in an extremely difficult economic environment so far, the Company will not be able to fend off the negative consequences of the anticipated economic downturn entirely. The as yet unforeseeable development of international auto markets represents a threat to the economic success of the Company. However, thanks to its fresh, attractive product range, the Audi Group believes it is well equipped to meet these challenges head on. In addition, the extensive and sustainable measures already implemented by the Company in the past to improve costs and processes will further reduce the risk. The Audi Group also keeps a watchful eye on the market with the aid of early indicators, which helps it anticipate fluctuations in sales so that it can respond by adjusting production accordingly. Being able to transfer production between the various locations under the production turntable principle and using timebanking provides additional flexibility.

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The development of international raw materials markets presents a further risk. In addition to securing adequate supplies of production materials, priority is given to minimizing cost risks. The Audi Group implements comprehensive hedging strategies and permanently monitors relevant raw materials markets. Of particular importance here is the development of oil prices. A renewed, permanent increase in the price of oil could lead not just to higher production and energy costs for the Company but also to rising fuel costs, which could make customers more reluctant to buy cars. The Audi Group has sought to pre-empt such problems by developing new, efficient drive concepts, alternative fuels and vehicle concepts that focus on changing customer requirements, such as the Audi brand’s highly economical e models. As a company with global operations, the Audi Group generates a significant portion of its revenue in foreign currency. As a result, it is exposed to risk from exchange rate fluctuations that cannot be anticipated, but which could adversely affect revenue and, therefore, consolidated net profit. Of particular note are exchange rate fluctuations between the euro and the U.S. dollar, the pound sterling and the Japanese yen. The Audi Group counters these risks by employing appropriate hedging instruments to an economically reasonable extent and in close, continuous consultation with the Volkswagen Group. Other risk factors include unforeseeable political intervention in the economy, an escalation in political tensions, terrorist attacks and possible pandemics, all of which could also have a detri- mental effect on the Audi Group’s business performance by undermining economic activity or international capital markets.

INDUSTRY RISKS

The financial crisis and the associated squeeze in the credit markets poses a major challenge to the entire automotive industry. In addition to it being more difficult to access outside capital, borrowing costs have also gone up. Thanks to the Audi Group’s successful business performance in recent years, it enjoys high liquidity and therefore considers itself to be in a good position to tackle future challenges. One consequence of tighter lending practices is that a growing reluctance has been detected among customers to make purchases. Moreover, bad debts and the remeasurement of residual value risks are undermining the financial performance, net worth and financial position of many enterprises. Thanks to the Audi Group’s cautious use of vehicle financing instruments within its profit-oriented growth strategy, it is exposed to only modest economic risk here. Its long- established conservative approach to the assessment of residual values when concluding vehicle financing is particularly effective in mitigating risks. The increasingly difficult conditions in the automotive industry have engendered more predatory competition, characterized by the growing use of sales subsidies. This development may result in price erosion and higher marketing costs particularly in the Audi Group’s key sales regions of Western Europe, the United States and China, which in turn would adversely affect the Com- pany’s revenue and earnings performance. Any trend among direct competitors towards reducing prices will likewise undermine revenue and earnings as the Company will be unable to entirely ignore such practices in the long term. In addition, potential state subsidies for individual manufacturers or vehicle categories could distort competition, thereby adversely affecting the financial position of the Audi Group. A further major challenge for the entire automotive industry stems from the growing pressure to improve vehicles’ fuel efficiency and reduce their emissions. In addition to the various legal

requirements being discussed around the world, such as CO2 limits, a protracted public debate could adversely affect the image of all manufacturers and so ultimately be to the detriment of

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the Audi Group’s financial performance. As in the past, the Audi Group is prepared to actively Management Report tackle this challenge. In keeping with the brand essence “Vorsprung durch Technik,” it has been 128 Business and underlying situation continuously improving the fuel efficiency of its vehicles over recent years through numerous 157 Financial performance technological innovations in the fields of lightweight construction, aerodynamics and energy 159 Net worth 160 Financial position efficiency. The Audi Group is also intensively researching alternative fuels and drive concepts. 160 Report on post-balance sheet date events 161 Risk report 161 The risk management system RISKS FROM OPERATING ACTIVITIES within the Audi Group 161 Economic risks 162 Industry risks There are a number of potential risks associated with the Audi Group’s operating activities that 163 Risks from operating activities could lastingly affect its net worth, financial position and financial performance. 163 Legal risks These include critical occurrences such as explosions or major fires that could destroy or damage 164 Personnel risks 164 Information and IT risks the Group’s assets and also cause consequential losses by hindering the production process. 164 Financial risks Major production problems could also be caused by disruptions to the energy supply and techni- 165 Overall assessment of the risk position cal disruptions, in particular to information technology. Although such risks harbor considerable 165 Report on expected potential for losses, their probability is viewed as being relatively low. The Audi Group counter- developments 169 Disclaimer acts these risks in particular through adequate insurance coverage and preventive measures, such as fire protection systems. The high flexibility of the Audi production network also reduces risk. Further disruption could be caused by supply delays or non-delivery as a result of tool breakage, losses from natural disasters and strikes at suppliers or in the transportation sector. The current financial and economic crisis has also led to increasing financial problems at individual suppliers and dealers, in some cases leading to their insolvency. The Audi Group limits such risks by implementing detailed supplier selection, monitoring, steering and support processes. The automotive industry’s customary close ties between manufacturer and supplier bring both economic benefits and growing dependence, which is heightened by the international scale of suppliers’ operations. The Audi Group counters the resulting risks, for example, by defining appropriate contractual terms and retaining title over tools used by third-party companies. As an innovative carmaker, the Audi Group is gradually broadening its model range and entering diverse new product segments. Not only does it plan meticulously, it also commissions numerous market studies to underpin the decision-making process for new vehicle projects. In spite of these thorough preparations, a model’s market success cannot always be predicted. Furthermore, the development of new vehicles and components carries with it a number of other potential risks. In addition to delays and changes to the product at short notice, these primarily concern the loss of expertise to service providers outside the Group. The Audi Group protects itself against this risk by methodically safeguarding its intellectual proprietorship of core skills and consciously selecting reliable system partners.

LEGAL RISKS

All activities by the corporate bodies, management personnel and employees of the Audi Group must comply with the prevailing legal and regulatory framework. The Company takes all necessary measures to ensure that all such actions are lawful. In addition to preparing Group-wide codes of conduct, in particular it provides regular employee training on new legal requirements. Nevertheless, in light of the growing complexity of legal requirements, the expansion of business activities and the high international spread of the Audi Group, there is an increasing risk of unwittingly, and therefore unintentionally, acting unlawfully. In order to counter such risks, the Audi Group has installed an internal compliance organization.

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The Audi Group’s premium vehicles aspire to the customer’s highest possible expectations of quality. Even so, potential product liability risks can never be entirely ruled out. As well as causing serious damage to the Company’s image, this can have major financial consequences; particularly should they lead to lawsuits in the U.S. market. The Audi Group counteracts such risks through effective and systematic quality management, and by taking out insurance cover and creating provisions within an economically reasonable scope. The Audi Group is not currently involved in any legal or arbitration proceedings that could have a lasting impact on the economic position of the Company.

PERSONNEL RISKS

As a manufacturer of technologically advanced, high-quality premium vehicles, the Audi Group will continue to depend on its well-qualified specialists and managers. Thanks to its reputation as an attractive employer, the Audi Group is in a very strong position to attract good personnel despite an intensely competitive job market. Furthermore, its broad training program facilitates the securing of junior personnel for specific tasks within the Company itself. The Audi Group seeks to minimize the loss of expertise through fluctuation or partial retirement by implementing comprehensive, needs-based incentive systems and intensive competence management. These involve in particular the systematic transfer of knowledge from departing experts and managers to their successors. Germany’s aging, shrinking population poses a major challenge to all companies. The Audi Group identified this scenario long ago and promptly took initiatives to correctly counter this development. As well as adapting working conditions to suit an employee’s age, it applies models for the individual’s working life and makes special part-time arrangements. Other priority areas include preventive health care and strengthening employee awareness about taking responsibility for their own financial future.

INFORMATION AND IT RISKS

Efficient, cost-effective processes and information technologies that meet the business requirements of the Audi Group are a major success factor behind the realization of ongoing productivity gains. Moreover, the ready availability of data and information flows across all corporate locations is of prime importance in keeping procedures throughout the Company swift and efficient. The growing prevalence of electronic networks, however, does harbor potential information and IT risks, which could adversely affect financial performance. The principal risks are the failure of key IT systems within the value chain, unauthorized access to the system, and the creation of heterogeneous system landscapes. These risks are largely mitigated by stable IT infrastructures with high availability. In addition, Group-wide security standards have a hand in largely ensuring the continuity of internal processes and Company security.

FINANCIAL RISKS

The financial risks resulting from the Audi Group’s business activities comprise market price risks (exchange rate, interest rate and commodity price risks), creditworthiness risks and liquidity risks.

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As a company with global operations, foreign exchange risks, relating in particular to the Management Report U.S. dollar, the pound sterling and the Japanese yen are of particular relevance. 128 Business and underlying situation Detailed information on the hedging policy and risk management in the area of financial risks, 157 Financial performance in particular relating to the use of derivative financial instruments in hedging transactions, is 159 Net worth 160 Financial position presented in the Notes in “Additional disclosures” under Section 34 “Management of financial 160 Report on post-balance sheet risks.” date events 161 Risk report 161 The risk management system within the Audi Group 161 Economic risks OVERALL ASSESSMENT OF THE RISK POSITION 162 Industry risks 163 Risks from operating activities The currently unforeseeable consequences of the international financial and economic crisis on 163 Legal risks the further development of global auto markets represent a considerable risk to all businesses 164 Personnel risks 164 Information and IT risks in the automotive industry. 164 Financial risks However, on the basis of all known circumstances and facts, no risks currently exist that could 165 Overall assessment of the risk position significantly and lastingly undermine the net worth, financial performance and financial posi- 165 Report on expected tion of the Audi Group, let alone endanger the Company’s survival in the foreseeable future. developments 165 Anticipated development of the economic environment 166 Anticipated development of the Audi Group REPORT ON EXPECTED DEVELOPMENTS 169 Disclaimer ANTICIPATED DEVELOPMENT OF THE ECONOMIC ENVIRONMENT

General economic situation With the financial crisis having spilled over into the real economy in the second half of 2008, the global economy is experiencing an unexpectedly sharp downturn that had spread to all regions by the end of last year. In view of the lingering uncertainty, it is very difficult to deliver a reliable assessment of the prospects for the global economy for 2009 and indeed 2010. General predictions on the intensity and duration of the global downswing show a considerable margin of fluctuation. The Audi Group’s assessment of the general economic situation is that the financial crisis and global recession will have serious repercussions in 2009, dampening both investment and consumption worldwide. The financial development of businesses around the world will suffer, which will likely have negative consequences on the job market. Due to the global economic downturn and falling energy and raw materials prices, inflation will remain low in 2009. Fiscal and monetary policy worldwide will probably remain strongly expan- sionary. The assessment of the Audi Group is that the global economy will contract in 2009 due to falling economic output in industrialized nations. A marked drop in growth rates is equally expected in developing and emerging markets. In view of the measures taken by governments and central banks to stabilize the financial sector and bolster economic activity, the Audi Group assumes that there is no risk of the global economy descending into a more protracted period of depression. Therefore, the Company expects the global economy to experience a mild recovery in 2010. In the United States, 2009 will be dominated by a continuing recession, which the new U.S. government and the Federal Reserve have probably cushioned at least to some degree thanks to their swift action. The economy of Western Europe will experience a phase of recession in 2009, with gross domestic product falling in all major national economies. The Audi Group equally expects the gross domestic product in Germany to slide. The level of export trade, particularly for capital goods and automobiles, will retreat noticeably. Consumer spending is not likely to bolster the economy to any significant degree. Although falling inflation and the German government’s economic recovery programs will noticeably relieve the burden on households, any benefits are likely to be offset by the expected rise in unemployment and the resulting losses of income.

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The rate of economic expansion will fall sharply in Central and Eastern Europe. The performance of the Russian economy is likely to suffer in particular as a result of the sharp drop in prices for energy sources. The same applies to the raw materials exporting countries of Latin America. Falling demand from abroad is likely to have a stronger impact on Asia’s emerging markets in 2009, slowing down their economic growth visibly. For example, economic growth in China will once again be slower than in the previous year despite the Chinese government’s economic stimulus program. The Japanese economy is likely to slip deeper into recession in 2009.

The car industry Due to the downturn in the global economy, the Audi Group anticipates that global demand for automobiles will drop significantly in 2009. Virtually all auto markets worldwide will be affected by the negative trend, including the previous growth hotspots China, Brazil and Russia. In view of these economic prospects, the Audi Group expects the situation in the U.S. automotive market to deteriorate even further in the current fiscal year. The overall market volume will probably be down again on the low prior-year level, at considerably below 13 million units. The Company likewise expects a further deterioration in the general market environment in Germany. The economic downturn expected in 2009 will clearly mute demand for cars from both private individuals and businesses. It currently remains to be seen to what extent the economic stimulus packages passed by the German government and the “environmental bonus” will positively impact demand for vehicles. This, incidentally, also applies to other countries in which corresponding economic measures are planned. Car markets in Western Europe (excluding Germany) are also expected to experience a sharp downturn. The Audi Group expects the volume of new car registrations to tumble by a high double-digit percentage rate. The countries of Central and Eastern Europe will also be caught up in the downward trend in 2009. Russia, the most important market in the region, is also likely to fall short of the 2008 sales volume. The growth of recent years is likely to come to an end in the Asia-Pacific region. The previously high-growth Chinese passenger car market in particular will experience a fall in volume. In Japan, the previous year’s negative trend will become even more acute. The Audi Group only expects the Indian car market to match the previous year’s level in 2009.

ANTICIPATED DEVELOPMENT OF THE AUDI GROUP

2009 will likely be the most difficult year in the automotive industry’s history. Nor will the Audi Group be able to resist the trend. Meanwhile, continuing volatility in the markets will make it impossible to plan reliably on the basis of secure assumptions. Instead, the best way to tackle developments promptly and comprehensively is to meet them with a flexible, forward-looking approach.

Anticipated development of deliveries In view of the slump in international car markets – occasionally by quite dramatic levels – and with no current prospects of an improvement in demand, the Audi Group will likely not repeat the record deliveries of the past fiscal year. However, thanks to its fresh, attractive product range with powerful, efficient engines, the Audi core brand is confident that it will be able to achieve success even under these difficult conditions and in the face of increasingly intense competition. Further to the new vehicles successfully launched last year, a large number of additional models and derivatives should help to capture new customer segments and give the Audi brand’s appeal a long-term boost in 2009. The Company therefore expects that deliveries of the Audi brand in major markets will outperform those markets as a whole, and that market shares will be increased.

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The goal in Germany, the highest-volume market for Audi vehicles, is to build on the already Management Report strong market position in 2009. Alongside the very successful Audi A4 and Audi A5 car lines, 128 Business and underlying situation this process will be aided by the new Audi Q5, which has been very well received by customers, 157 Financial performance the trade and journalists. 159 Net worth 160 Financial position The Company also expects that these models will provide a vital stimulus for car markets in 160 Report on post-balance sheet Western Europe. There too, however, the Audi brand will not entirely escape the variously sharp date events 161 Risk report downturn that is forecast for some of these markets. 165 Report on expected In Central and Eastern Europe, and most particularly in Russia, the growth in deliveries of recent developments 165 Anticipated development of years will be brought to a halt by the sharp fall in car demand. However, the Company is con- the economic environment fident that it will be able to further strengthen the competitive position of the Audi brand. 166 Anticipated development of the Audi Group In China, its most important foreign market, the Audi brand expects to consolidate its leading 169 Disclaimer position in the premium segment. The Audi A4 L, which arrived on that market this year and is being built exclusively for China, should play a key role in comprehensively meeting customer requirements for modern mobility in a spacious, comfortable vehicle. The positive trend of recent years is set to continue in the Indian car market, where assembly of the new Audi A4 began in the past fiscal year alongside local CKD assembly of the Audi A6. The situation in the U.S. auto market will remain exceptionally difficult in 2009. The Company is seeking to capture increased market share with the launch of its ultra-efficient diesel technology and new models such as the Audi Q5. Following the sharp drop in international demand for cars in 2009, the Audi Group expects markets to stabilize in 2010. This development is anticipated to lead to a rise in the Audi Group’s deliveries.

Comprehensive measures within the context of business activities The Audi Group will continue to monitor the development of the Company’s major sales markets using early indicators so that it can respond accordingly by adjusting its production volume. Being able to transfer production between the various locations using the production turntable is just one of the options that give the Company a vital degree of flexibility. Moreover, working hour models, flexible shift systems and timebanking accounts have been agreed in recent years in close consultation with employee representatives, giving the Company leeway to cushion short-term fluctuations in production if needed. With regard to the impact of market fluctuations, the Company will use the options afforded by the framework of operating requirements, negotiated pay agreements and laws to stabilize the employment situation of its core workforce. And over the next few months, measures already underway that seek to permanently improve processes and costs in all divisions will be pursued with unrelenting intensity. In view of the difficult current economic environment, the Company is also paying particular attention to outside partners. At the sourcing end, its priority is to exclude any disruption to the production process from key suppliers going out of business. In close consultation with the Volkswagen Group, the Audi Group will further intensify its collaboration with key suppliers by way of comprehensive risk management. This equally applies to the sales end. A committee has been set up within the Company to work out jointly with dealers experiencing difficulties how potential financial bottlenecks can be overcome.

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Anticipated financial performance In view of the expected decrease in deliveries, revenue in 2009 will likewise not be able to match last year’s figure. However, the ongoing productivity and process improvements already made in conjunction with disciplined cost management will lessen the expected impact a cyclical fall in demand will have on earnings.

Anticipated financial position In the current fiscal year, the Audi Group will once again be able to finance outgoings internally. There remains no need for external sources of financing. All Group companies are assured the necessary liquidity through the Group’s own cash pool. Cash used in investing activities will be slightly below the previous year’s high level in spite of the continuing, long-term model initiative. The Audi Group’s net liquidity will remain high.

Capital investments Even in the extremely difficult current economic environment, the Audi Group will continue to press ahead with all necessary product and structural investments. These plans focus on customer-driven additions to the model and engine range, on the expansion of development and production structures necessitated by these, on improving the productivity and quality of process chains, and on strengthening customer loyalty. All investment measures share the common objective of strengthening the Audi Group’s market position sustainably through a forward-looking model and brand strategy. Systematic investment management ensures that all investment projects are carried out to the Audi Group’s high quality standards and according to schedule.

Anticipated development of the workforce Compared to the past fiscal year, the size of the workforce will remain largely unchanged in 2009.

Opportunities for future development Opportunities for the Audi Group’s future development are offered by forward-looking strategies and measures designed to assure the Company’s sustainable, profitable growth. Systematic renewal and expansion of the product portfolio is of exceptional significance here. After 17 product launches in 2008 alone, the model initiative will continue seamlessly in the 2009 fiscal year with major market launches such as the Audi A5 Cabriolet and S5 Cabriolet, and the highly sporty versions Audi S4 Sedan and Audi S4 Avant. Further increasing the Company’s market share in key sales markets remains an important objective for 2009. Alongside launching diesel technology in the North American markets, the focus will be on extending the exclusive Audi dealer and service network, and more concertedly tailoring the range of vehicles available in burgeoning markets such as India, China and Russia to local requirements.

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Overall assessment of anticipated future developments Management Report As a result of having destabilized markets worldwide, the financial crisis has now spread to the 128 Business and underlying situation real economy. 2009 will probably be the most difficult year in the history of the automotive 157 Financial performance industry. The Audi Group itself will not be able to resist the pull of this trend. 159 Net worth 160 Financial position However, thanks to its strategy of sustained, profitable growth in recent years, the Audi Group 160 Report on post-balance sheet has established a sound basis and, thanks to a fresh, attractive product range and a highly moti- date events 161 Risk report vated workforce that identifies closely with the Company, it believes it is well equipped to tackle 165 Report on expected the challenges that lie ahead. Moreover, corrective action was taken promptly in an effort to developments 165 Anticipated development of lessen the anticipated impact of a cyclical downturn in demand on earnings. the economic environment The Audi Group expects that, following a marked downturn in the global economy in 2009, 166 Anticipated development of the Audi Group markets will stabilize in 2010. This development is also anticipated to have a positive effect on 169 Disclaimer the Company’s key performance indicators.

DISCLAIMER

The Management Report contains forward-looking statements relating to anticipated developments. These statements are based upon current assessments and are by their very nature subject to risks and uncertainties. Actual outcomes may differ from those predicted in these statements.

170 Consolidated Financial Statements of the Audi Group at December 31, 2008 Income Statement of the Audi Group

EUR million Notes 2008 2007

Revenue 1 34,196 33,617

Cost of sales 2 – 28,848 – 28,478 Gross profit 5,348 5,139

Distribution costs 3 – 3,240 – 2,737

Administrative expenses 4 – 302 – 266 Other operating income 5 1,588 1,266

Other operating expenses 6 – 622 – 697 Operating profit 2,772 2,705

Result from investments accounted for using the equity method 7 57 47

Financing costs 8 – 293 – 237 Other financial results 9 641 400 Financial result 405 210

Profit before tax 3,177 2,915

Income tax expense 10 – 970 – 1,223

Profit after tax 2,207 1,692 of which profit share of minority interests 29 38 of which profit share of AUDI AG stockholders 2,178 1,654

Appropriation of profit share due to AUDI AG stockholders

Profit transfer to Volkswagen AG 11 – 1,230 – 1,412 Transfer to retained earnings 948 242

EUR Notes 2008 2007 Earnings per share 12 50.66 38.46 Diluted earnings per share 12 50.66 38.46

171

Balance Sheet of the Audi Group

ASSETS in EUR million Notes Dec. 31, 2008 Dec. 31, 2007 Consolidated Financial Statements Non-current assets 9,537 8,325 170 Income Statement 171 Balance Sheet Fixed assets 8,190 7,379 172 Cash Flow Statement Intangible assets 14 2,112 2,022 173 Statement of Changes in Equity

Property, plant and equipment 15 5,846 5,178 Notes to the Consolidated Investment property 16 5 9 Financial Statements Investments accounted for using the equity method 152 121 174 Development of Other long-term investments 17 75 49 fixed assets 2008 176 Development of Deferred tax assets 18 691 660 fixed assets 2007 Other receivables and other financial assets 19 656 286 178 General information 183 Recognition and measurement principles Current assets 16,519 14,253 189 Notes to the Income Inventories 20 3,347 2,661 Statement 196 Notes to the Balance Sheet Trade receivables 21 2,215 2,149 209 Additional disclosures Effective income tax 22 17 5 227 Events occurring subsequent to the balance sheet date Other receivables and other financial assets 19 5,318 1,365 228 Statement of Interests Securities 23 789 1,333 held by the Audi Group Cash and cash equivalents 23 4,833 6,740

Balance sheet total 26,056 22,578

LIABILITIES in EUR million Notes Dec. 31, 2008 Dec. 31, 2007

Equity 10,328 8,355 AUDI AG stockholders’ interests 24 9,960 8,312 Issued capital 24 110 110 Capital reserve 24 1,617 911 Retained earnings 24 8,233 7,291 Minority interests 24 368 43

Liabilities 15,728 14,223

Non-current liabilities 6,029 5,269 Financial liabilities 25 3 4 Deferred tax liabilities 26 78 5 Other liabilities 27 447 288 Provisions for pensions 28 1,946 1,957 Effective income tax obligations 29 853 588 Other provisions 30 2,702 2,427

Current liabilities 9,699 8,954 Financial liabilities 25 673 527 Trade payables 31 3,302 2,794 Effective income tax obligations 29 128 375 Other liabilities 27 3,094 3,013 Other provisions 30 2,502 2,245

Balance sheet total 26,056 22,578

172

Cash Flow Statement of the Audi Group

from January 1 to December 31, 2008

EUR million 2008 2007

Profit before profit transfer and income taxes 3,177 2,915

Income tax payments – 946 – 1,395 Amortization of capitalized development costs 530 656 Impairment losses (reversals) on property, plant and equipment and other intangible assets 1,371 1,433

Impairment losses (reversals) on financial assets and goodwill amortization – 63 198

Result from the disposal of assets – 10 1

Result from investments accounted for using the equity method – 14 2 Change in provisions 494 597

Change in inventories – 600 – 157

Change in receivables – 198 – 349 Change in liabilities 562 961 Other non-cash income and expenses 35 14 Cash flow from operating activities 4,338 4,876

Additions of capitalized development costs – 547 – 497

Investments in property, plant and equipment and other intangible assets – 1,906 – 1,578

Acquisition of affiliated companies and participating interests – 58 – 44 Sale of shares 101 3

Other cash changes – 2 32

Change in securities 487 – 308

Change in fixed deposits and loans extended – 3,991 – 102

Cash flow from investing activities – 5,916 – 2,494

Capital contributions 706 433

Transfer of profit – 1,412 – 856

Change in financial liabilities 111 – 82

Lease payments – 1 – 2

Cash flow from financing activities – 596 – 507

Change in cash and cash equivalents due to changes in group of consolidated companies 250 8

Change in cash and cash equivalents due to changes in exchange rates 17 – 27

Change in cash and cash equivalents – 1,907 1,856 Cash and cash equivalents at beginning of period 6,740 4,884 Cash and cash equivalents at end of period 4,833 6,740

EUR million 2008 2007 Cash and cash equivalents 4,833 6,740 Fixed deposits, securities and loans extended 5,134 1,651 Gross liquidity 9,967 8,391

Credit outstanding – 675 – 531 Net liquidity 9,292 7,860

The Cash Flow Statement is explained in Note 35.

173

Statement of Changes in Equity

EUR million 2008 2007 Consolidated Financial Statements Financial assets available for sale 170 Income Statement 171 Balance Sheet Fair value changes recognized directly in equity without affecting income – 130 33 172 Cash Flow Statement

Included in the Income Statement 114 – 50 173 Statement of Changes in Equity

Cash flow hedges Notes to the Consolidated Fair value changes recognized directly in equity without affecting income 476 819 Financial Statements

Included in the Income Statement – 553 – 298 174 Development of fixed assets 2008 Currency translation differences 9 4 176 Development of Deferred tax items netted directly against equity 11 – 161 fixed assets 2007 Actuarial gains and losses from provisions for pensions 57 51 178 General information 183 Recognition and Income and expenditure after tax from equity-accounted investments measurement principles recognized directly in equity 17 – 14 189 Notes to the Income Income and expense recognized directly in equity 1 384 Statement 196 Notes to the Balance Sheet Profit after tax 2,207 1,692 209 Additional disclosures Total income and expense recognized in the fiscal year 2,208 2,076 227 Events occurring subsequent Attributable to AUDI AG stockholders 2,172 2,038 to the balance sheet date 228 Statement of Interests Attributable to minority interests 36 38 held by the Audi Group

174

Notes to the Consolidated Financial Statements

DEVELOPMENT OF FIXED ASSETS IN THE 2008 FISCAL YEAR

EUR million Gross carrying amounts

Changes in group of Changes from consolidated Currency measurement Costs companies changes Additions at equity Transfers Disposals Costs

Jan. 1, 2008 Dec. 31, 2008 Intangible assets 3,896 14 – 660 – 1 465 4,106 Concessions, industrial property rights and similar rights and assets, as well as licenses thereto 362 14 – 111 – 1 53 435 Capitalized development costs, products currently under development 612 – – 369 – – 351 – 630 Capitalized development costs, products currently in use 2,922 – – 178 – 351 412 3,039 Payments on account for intangible assets – – – 2 – – – 2

Property, plant and equipment 17,279 693 6 1,793 – 4 524 19,251 Land, land rights and buildings, including buildings on land owned by others and leased buildings 3,457 288 6 174 – 57 47 3,935 Plant and machinery 4,181 143 – 184 – 142 132 4,518 Other plant and office equipment, as well as leased plant and office equipment 9,190 262 – 895 – 189 341 10,195 Payments on account and assets under construction 451 – – 540 – – 384 4 603

Investment property 13 – 2 – – – 5 – 10

Investments accounted for using the equity method 121 – 15 – 16 – – 152

Other long-term investments 189 – 123 1 33 – – – 100

Investments in affiliated companies 178 – 123 1 31 – – – 87 Participating interests 11 – – – – – – 11 Securities – – – 2 – – – 2

Total fixed assets 21,498 584 24 2,486 16 – 989 23,619

175

Value adjustments in gross carrying amounts Carrying amounts

Cumulative Changes in Cumulative depreciation group of depreciation and consolidated Currency Additions, Additions, Write- and amortization companies changes scheduled unscheduled Transfers Disposals ups amortization

Jan. 1, 2008 Dec. 31, 2008 Dec. 31, 2008 Dec. 31, 2007 1,874 6 – 556 23 – 465 – 1,994 2,112 2,022

263 6 – 42 7 – 53 – 265 170 99

140 – – – 2 – – – 142 488 472

1,471 – – 514 14 – 412 – 1,587 1,452 1,451

– – – – – – – – – 2 –

12,101 485 2 1,247 75 – 505 – 13,405 5,846 5,178

1,709 140 2 127 – – 42 – 1,936 1,999 1,748 2,945 125 – 364 1 – 128 – 3,307 1,211 1,236

7,447 220 – 756 74 – 335 – 8,162 2,033 1,743

– – – – – – – – – 603 451

4 – 1 – – – – – 5 5 9

– – – – – – – – – 152 121

140 – 53 1 – 7 – – 70 25 75 49

138 – 53 1 – 7 – – 70 23 64 40 2 – – – – – – – 2 9 9 – – – – – – – – – 2 –

14,119 438 4 1,803 105 – 970 70 15,429 8,190 7,379

176

DEVELOPMENT OF FIXED ASSETS IN THE 2007 FISCAL YEAR

EUR million Gross carrying amounts

Changes in group of Changes from consolidated Currency measurement Costs companies changes Additions at equity Transfers Disposals Costs

Jan. 1, 2007 Dec. 31, 2007 Intangible assets 4,334 8 – 552 – 2 1,000 3,896 Concessions, industrial property rights and similar rights and assets, as well as licenses thereto 321 3 – 55 – 4 21 362 Goodwill 172 5 – – – – 177 – Capitalized development costs, products currently under development 883 – – 322 – – 562 31 612 Capitalized development costs, products currently in use 2,956 – – 175 – 562 771 2,922 Payments on account for intangible assets 2 – – – – – 2 – –

Property, plant and equipment 16,200 58 – 5 1,527 – – 2 499 17,279 Land, land rights and buildings, including buildings on land owned by others and leased buildings 3,331 41 – 4 101 – 54 66 3,457 Plant and machinery 3,853 1 – 293 – 222 188 4,181 Other plant and office equipment, as well as leased plant and office equipment 8,438 16 – 1 727 – 253 243 9,190 Payments on account and assets under construction 578 – – 406 – – 531 2 451

Investment property 13 – – – – – – 13

Investments accounted for using the equity method 128 3 – 4 – – 3 – 3 – 121

Other long-term investments 162 – – 36 – 3 12 189 Investments in affiliated companies 151 – – 36 – 3 12 178 Participating interests 11 – – – – – – 11

Total fixed assets 20,837 69 – 9 2,115 – 3 – 1,511 21,498

177

Value adjustments in gross carrying amounts Carrying amounts

Jan. 1, 2007 Dec. 31, 2007 Dec. 31, 2007 Dec. 31, 2006 1,999 3 – 493 379 – 1,000 – 1,874 2,022 2,335

242 3 – 39 – – 21 – 263 99 79 – – – – 177 – 177 – – – 172

31 – – – 158 – 18 31 – 140 472 852

1,726 – – 454 44 18 771 – 1,471 1,451 1,230

– – – – – – – – – – 2

11,177 11 – 1,169 225 – 481 – 12,101 5,178 5,023

1,639 2 1 128 – – 61 – 1,709 1,748 1,692 2,799 1 – 331 – – 186 – 2,945 1,236 1,054

6,739 8 – 1 710 225 – 234 – 7,447 1,743 1,699

– – – – – – – – – 451 578

4 – – 0 – – – – 4 9 9

– 2 – – – – 2 – – – 121 128

121 – – – 21 2 4 – 140 49 41 119 – – – 21 2 4 – 138 40 32 2 – – – – – – – 2 9 9

13,301 16 – 1,662 625 – 1,485 – 14,119 7,379 7,536

178

GENERAL INFORMATION

AUDI AG has the legal form of a German stock corporation (Aktiengesellschaft). Its registered office is at Ettinger Strasse, Ingolstadt, and the company is recorded in the Commercial Register of Ingolstadt under HR B 1. Around 99.55 percent of the issued capital of AUDI AG is held by Volkswagen AG (Wolfsburg), with which a control and profit transfer agreement is in force. The Consolidated Financial Statements of AUDI AG are included in the consolidated financial statements of Volkswagen AG, which are held on file at the Local Court of Wolfsburg. The purpose of the Company is the development, production and sale of motor vehicles, other vehicles and engines of all kinds, together with their accessories, as well as machinery, tools and other technical articles.

ACCOUNTING PRINCIPLES

AUDI AG prepares its Consolidated Financial Statements on the basis of the International Finan- cial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). All pronouncements of the International Accounting Stan- dards Board (IASB) whose application is mandatory have been observed. The prior-year figures have been calculated according to the same principles. The Income Statement is prepared according to the internationally practiced cost of sales method. AUDI AG prepares its Consolidated Financial Statements in euros (EUR). The Consolidated Financial Statements provide a true and fair view of the net worth, financial performance and financial position of the Audi Group. The requirements pursuant to Section 315a of the German Commercial Code (HGB) regarding the preparation of consolidated financial statements in accordance with IFRS, as endorsed by the EU, are met. All requirements that must be applied under German commercial law are additionally observed in preparing the Consolidated Financial Statements. The German Corporate Governance Code is also complied with and is permanently available on the Internet at www.audi.com/cgk-declaration.

Effects of new or revised standards The following new or modified standards were applied in the Audi Group during the 2008 fiscal year: – IAS 39: Reclassification of financial assets – IFRS 7: Reclassification of financial assets

The first-time adoption of the standards has no effect on the presentation of the figures in the Consolidated Financial Statements.

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New or revised standards not applied Consolidated Financial The following new or amended accounting standards already approved by the IASB were not Statements 170 Income Statement applied in the Consolidated Financial Statements for the 2008 fiscal year because their applica- 171 Balance Sheet tion was not yet mandatory: 172 Cash Flow Statement 173 Statement of Changes in Equity

Standard/ Mandatory Endorsed Notes to the Consolidated Interpretation effective 1) by EU Anticipated effects Financial Statements IFRS 1 First-time Adoption of 174 Development of International Financial fixed assets 2008 Reporting Standards Jan. 1, 2010 No None 176 Development of fixed assets 2007 IFRS 1 / Cost of an Investment in a 178 General information IAS 27 Subsidiary, Jointly Controlled 178 Accounting principles Entity or Associate Jan. 1, 2009 No None 180 Group of consolidated IFRS 2 Share-based Payment – Vesting companies Conditions and Cancellations Jan. 1, 2009 Yes None 181 Key effects of changes to the group of consolidated IFRS 3 / Business Combinations / companies on the opening IAS 27 Consolidated and Separate Changed presentation of balance sheet for 2008 Financial Statements Jan. 1, 2010 No corporate mergers 182 Consolidation principles IFRS 8 Operating Segments Jan. 1, 2009 Yes Segment reporting 182 Foreign currency translation 183 Recognition and IAS 1 Presentation of Financial Redefinition of the structure measurement principles Statements Jan. 1, 2009 Yes of financial statements 189 Notes to the Income IAS 1 / IAS 32 Puttable Financial Instruments and Statement Obligations Arising on Liquidation Jan. 1, 2009 No None 196 Notes to the Balance Sheet 209 Additional disclosures IAS 23 Borrowing Costs Minor increase in carrying 227 Events occurring subsequent Jan. 1, 2009 Yes amount of qualifying assets to the balance sheet date IAS 39 / Reclassification of Financial Assets 228 Statement of Interests IFRS 7 – Effective Date and Transition Jan. 1, 2009 No None held by the Audi Group IAS 39 Exposures Qualifying for Hedge Accounting Jan. 1, 2010 No None Improvements to IFRSs 2) Jan. 1, 2009 / Jan. 1, 2010 No Not material IFRIC 12 Service Concession Arrangements Jan. 1, 2009 No None IFRIC 13 Customer Loyalty Programmes Jan. 1, 2009 Yes None IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction Jan. 1, 2009 Yes Insignificant IFRIC 15 Agreements for the Construction of Real Estate Jan. 1, 2009 No None IFRIC 16 Hedges of a Net Investment in a Foreign Operation Jan. 1, 2009 No None IFRIC 17 Distributions of Non-cash Assets to Owners Jan. 1, 2010 No None

1) Mandatory first-time application from AUDI AG’s perspective 2) Minor amendments to various standards (IAS 1, IAS 8, IAS 10, IAS 16, IAS 18, IAS 19, IAS 20, IAS 23, IAS 27, IAS 28, IAS 29, IAS 34, IAS 36, IAS 38, IAS 39, IAS 40, IAS 41)

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GROUP OF CONSOLIDATED COMPANIES

In addition to AUDI AG, the Consolidated Financial Statements include all principal companies in which AUDI AG can directly or indirectly determine the financial and business policy in order to benefit from the activities of the companies (subsidiaries) in question. Consolidation begins at that point in time when AUDI AG acquires the opportunity for control; it ends when that opportunity ceases to be available. Associated companies are accounted for using the equity method. Non-consolidated subsidiaries as well as participating interests are always reported at amortized cost because no active market exists for the shares of these companies and no fair value can reliably be determined with a justifiable amount of effort. Where there is evidence that the fair value is lower, this fair value is recognized. These subsidiaries are principally companies with only limited business operations. The group of consolidated companies has been extended since December 31, 2007 to include Audi Zentrum Hamburg GmbH (Hamburg) and Audi Zentrum Berlin-Charlottenburg GmbH & Co. KG (Berlin) in addition to AUDI BRUSSELS S.A./N.V. (Brussels, Belgium), which must be consolidated in accordance with IAS 27.13, sentence 2 (c). No longer included in the group of consolidated companies, with effect from December 1, 2008, is AUDI DO BRASIL E CIA. (Curitiba, Brazil), which was sold to Volkswagen do Brasil Indústria de Veículos Automotores Ltda. (São Bernardo do Campo, Brazil). The following table shows the composition of the Audi Group:

Total 2008 2007 AUDI AG and fully consolidated subsidiaries Germany 7 5 Other countries 15 15 Investments accounted for using the equity method Other countries 1 1 Non-consolidated subsidiaries Germany 14 16 Other countries 14 12 Total 51 49

The principal companies within the Audi Group are listed following the Notes. The full list of companies in which shares are held is recorded in the Commercial Register of Ingolstadt under HR B 1 and is also available on the Audi website at www.audi.com/subsidiaries. This list can additionally be requested directly from AUDI AG, Financial Communication/Financial Analysis, I/FF-12, 85045 Ingolstadt, Germany. Due to their inclusion in Audi’s Consolidated Financial Statements, quattro GmbH (Neckarsulm), Audi Retail GmbH (Ingolstadt), Audi Vertriebsbetreuungsgesellschaft mbH (Ingolstadt) and Audi Zentrum Hamburg GmbH (Hamburg) satisfy the conditions of Section 264, Para. 3 of the German Commercial Code and make use of the exemption rule. Audi Zentrum Berlin-Charlotten- burg GmbH & Co. KG (Berlin), which is fully consolidated, makes use of the exemption rule for commercial partnerships in Section 264b of the German Commercial Code.

Participating interests in associated companies As of the balance sheet date, FAW-Volkswagen Automotive Company, Ltd. (Changchun, China), in which an interest of 10 percent is held, is accounted for using the equity method. The holding is accounted for in accordance with the requirements of IAS 28.7 (a).

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On the basis of this interest, the following values are attributable to the Audi Group: Consolidated Financial Statements 170 Income Statement EUR million 2008 2007 171 Balance Sheet Non-current assets 158 115 172 Cash Flow Statement Current assets 390 194 173 Statement of Changes in Equity

Non-current liabilities 29 126 Notes to the Consolidated Current liabilities 367 183 Financial Statements Revenues 886 596 174 Development of fixed assets 2008 Net profit for the period 57 48 176 Development of fixed assets 2007 178 General information 178 Accounting principles 180 Group of consolidated KEY EFFECTS OF CHANGES TO THE GROUP OF CONSOLIDATED companies COMPANIES ON THE OPENING BALANCE SHEET FOR 2008 181 Key effects of changes to the group of consolidated companies on the opening The initial consolidation of AUDI BRUSSELS S.A./N.V. (Brussels, Belgium) was carried out in balance sheet for 2008 182 Consolidation principles accordance with the predecessor method. As a result of the company being consolidated for the 182 Foreign currency translation first time, there were the following effects on the Audi Group’s opening balance sheet as of 183 Recognition and measurement principles January 1, 2008: 189 Notes to the Income Statement 196 Notes to the Balance Sheet EUR million 209 Additional disclosures Non-current assets 207 227 Events occurring subsequent Current assets 362 to the balance sheet date 228 Statement of Interests of which inventories 39 held by the Audi Group Equity 289 Non-current liabilities 43 Current liabilities 237 Balance sheet total 569

The effect on the opening balance sheet due to the inclusion of the other companies that were consolidated for the first time as of January 1, 2008 – Audi Zentrum Hamburg GmbH (Hamburg) and Audi Zentrum Berlin-Charlottenburg GmbH & Co. KG (Berlin) – amounts to EUR 54 million. The carrying amounts correspond to the fair values. Revenue increased by EUR 525 million overall as a result of the first-time consolidations during the 2008 fiscal year. In terms of the Group’s profit before tax, the inclusion of the companies in the consolidated figures had a positive impact of EUR 18 million. The sale of AUDI DO BRASIL E CIA. (Curitiba, Brazil) to Volkswagen do Brasil Indústria de Veículos Automotores Ltda. (São Bernardo do Campo, Brazil) resulted in capital gains of EUR 103 million. As part of these selling activities, the following main groups of assets and liabilities were disposed of:

EUR million Non-current assets 70 Current assets 3 of which cash and cash equivalents 3 Non-current liabilities 1 Current liabilities –

The carrying amount of the non-current assets that were sold also includes an investment in a Brazilian partnership in the amount of EUR 70 million.

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CONSOLIDATION PRINCIPLES

The assets and liabilities of the domestic and foreign companies included in the Consolidated Financial Statements are recognized in accordance with the standard accounting and measurement policies of the Audi Group. In the case of subsidiaries that are being consolidated for the first time, the assets and liabilities are to be measured at their fair value at the time of acquisition. Any realized hidden reserves and expenses are amortized, depreciated or reversed in accordance with the development of the corresponding assets and liabilities as part of the subsequent consolidation process. Where the acquisition values of the investments exceed the Group share in the equity of the relevant company as calculated in this manner, goodwill is created. Goodwill acquired in a business combination is tested for impairment regularly, at the balance sheet date, and an impairment loss is recognized if necessary. Within the Audi Group, the predecessor method is applied in relation to common control transactions. Under this method, the assets and liabilities of the acquiree are measured at the gross carrying amounts of the previous parent company. The predecessor method thus means that no adjustment to the fair value of the acquired assets and liabilities is performed at the time of acquisition; any goodwill arising during initial consolidation is adjusted against equity, without affecting income. The Consolidated Financial Statements also include securities funds whose assets are attributable in substance to the Group. Receivables and liabilities between consolidated companies are netted, and expenses and income eliminated. Interim profits and losses are eliminated from Group inventories and fixed assets. Consolidation processes affecting income are subject to deferrals of income taxes, with deferred tax assets and liabilities being offset where the term and tax creditor are the same. The same accounting policies for determining the pro rata equity are applied to Audi Group companies accounted for using the equity method. The last set of audited financial statements of the company in question serves as the basis for this purpose.

FOREIGN CURRENCY TRANSLATION

The currency of the Audi Group is the euro (EUR). Foreign currency transactions in the individual financial statements of AUDI AG and the subsidiaries are translated on the basis of the exchange rates at the time of the transaction. Monetary items in foreign currencies are translated at the exchange rate applicable on the balance sheet date. Exchange differences are recognized in the current-period income statements of the respective Group companies. The foreign companies belonging to the Audi Group are foreign entities and prepare their financial statements in their local currency. The only exceptions are AUDI HUNGARIA MOTOR Kft. (Győr, Hungary) and Audi Volkswagen Middle East FZE (Dubai, United Arab Emirates), which prepare their annual financial statements in euros and U.S. dollars, respectively, rather than in local currency. The concept of the “functional currency” is applied when translating financial statements prepared in foreign currency. Assets and liabilities, with the exception of equity, are translated at the year-end exchange rate. The effects of foreign currency translation on equity are reported in the currency exchange reserve with no effect on income. The items in the Income Statement are translated using weighted average monthly rates. Currency translation variances arising from the differing exchange rates used in the Balance Sheet and Income Statement are recognized in equity, without affecting income. The development of the exchange rates serving as the basis for currency translation is shown below:

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1 EUR in foreign currency Dec. 31, 2008 Dec. 31, 2007 2008 2007 Consolidated Financial Statements Year-end exchange rate Average exchange rate 170 Income Statement Australia AUD 2.0274 1.6757 1.7416 1.6356 171 Balance Sheet 172 Cash Flow Statement Brazil BRL 3.2436 2.6145 2.6743 2.6632 173 Statement of Changes in Equity Japan JPY 126.1400 164.9300 152.4541 161.2406 Canada CAD 1.6998 1.4449 1.5594 1.4690 Notes to the Consolidated Financial Statements South Korea KRW 1,839.1300 1,377.9600 1,606.0872 1,273.3329 174 Development of USA USD 1.3917 1.4721 1.4710 1.3706 fixed assets 2008 People’s Republic of China CNY 9.4956 10.7524 10.2236 10.4186 176 Development of fixed assets 2007 178 General information 178 Accounting principles As all consolidated subsidiaries have their registered offices in countries in which there is 180 Group of consolidated currently no hyperinflation, IAS 29 does not apply. companies 181 Key effects of changes to the group of consolidated companies on the opening balance sheet for 2008 RECOGNITION AND MEASUREMENT PRINCIPLES 182 Consolidation principles RECOGNITION OF INCOME AND EXPENSES 182 Foreign currency translation 183 Recognition and measurement principles Revenue, interest income and other operating income are always recorded when the services are 183 Recognition of income and expenses rendered or the goods or products are delivered, in other words transfer of risk and reward to 183 Intangible assets the customer. 184 Property, plant and equipment Proceeds from the sale of vehicles for which buy-back agreements exist are not realized imme- 184 Investment property diately, but on a straight-line basis over the period between sale and buy-back, on the basis of 184 Investments accounted for using the equity method the difference between the selling price and the anticipated buy-back price. These vehicles are 185 Impairment tests reported under inventories. 185 Financial instruments 187 Other receivables and Operating expenses are recognized as income when the service is used or at the time they are financial assets economically incurred. 187 Deferred tax 187 Inventories 188 Securities, cash and cash equivalents 188 Provisions for pensions INTANGIBLE ASSETS 188 Other provisions 188 Management’s estimates and assessments Intangible assets acquired for consideration are recognized at cost of purchase, taking into 189 Notes to the Income account ancillary costs and cost reductions, and are amortized on a scheduled straight-line basis Statement 196 Notes to the Balance Sheet over their useful life. 209 Additional disclosures Concessions, rights and licenses relate to purchased computer software and subsidies paid. 227 Events occurring subsequent to the balance sheet date Research costs are treated as current expenses in accordance with IAS 38. The development 228 Statement of Interests costs for products going into series production are capitalized, provided that production of held by the Audi Group these products is likely to bring economic benefit to the Audi Group. If the conditions stated in IAS 38 for capitalization are not met, the costs are expensed in the Income Statement in the year in which they occur. Capitalized development costs encompass all direct and indirect costs that can be directly allocated to the development process. Financing costs are not capitalized. Amortization is performed on a straight-line basis from the start of production, over the anticipated model life of the developed products. The amortization plan is based principally on the following useful lives:

Useful life Concessions, industrial property rights and similar rights and assets 3–15 years of which software 3–5 years Capitalized development costs 5–9 years

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The amortization is allocated to the corresponding functional areas. Goodwill created or acquired in a business combination is recognized and tested for impairment regularly, as of the balance sheet date, pursuant to IAS 36. If necessary, an unscheduled impairment loss resulting from this test is recognized.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are measured at acquisition cost or cost of construction, with scheduled straight-line depreciation applied according to the pro rata temporis method. The costs of purchase include the purchase price, ancillary costs and cost reductions. In the case of self-constructed fixed assets, the cost of construction includes both the directly attributable cost of materials and cost of labor as well as indirect materials and indirect labor costs, which must be capitalized, including pro rata depreciation. Interest on borrowings is not included. The depreciation plan is generally based on the following useful lives, which are reassessed yearly:

Useful life Buildings 14–50 years Land improvements 10–33 years Plant and machinery 6–12 years Plant and office equipment including special tools 3–15 years

In accordance with IAS 17, property, plant and equipment used on the basis of lease agreements is capitalized in the Balance Sheet if the conditions of a finance lease are met; in other words if the significant risks and opportunities which result from its use have passed to the lessee. Capitalization is performed at the time of the agreement, at the lower of fair value or present value of the minimum lease payments. The straight-line depreciation method is based on the shorter of economic life or term of lease contract. The payment obligations resulting from the future lease installments are recognized as a liability at the present value of the leasing installments. Where Group companies have entered into operating leases as the lessee, in other words if not all risks and opportunities associated with title have passed to them, leasing installments and rents are expensed directly in the Income Statement.

INVESTMENT PROPERTY

Investment property is measured at amortized cost. Buildings are depreciated on a straight-line basis over a useful life of 33 years.

INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Companies in which AUDI AG is directly or indirectly able to exercise significant influence on financial and operating policy decisions (associated companies) are accounted for using the equity method. The pro rata equity of these companies is regularly recorded under long-term investments and the share of earnings recorded as income under the financial result.

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IMPAIRMENT TESTS Consolidated Financial Statements 170 Income Statement Fixed assets are tested regularly for impairment as of the balance sheet date. Impairment tests 171 Balance Sheet are carried out for development activities and property, plant and equipment on the basis of 172 Cash Flow Statement 173 Statement of Changes in Equity expected product life cycles, the respective revenue and cost situation, current market expectations and currency-specific factors. Notes to the Consolidated Financial Statements Expected future cash flows to fixed assets are discounted with country-specific discount rates 174 Development of that adequately reflect the risk and amount to at least 9 percent before tax. fixed assets 2008 Impairment loss pursuant to IAS 36 is recognized where the recoverable amount, i.e. the higher 176 Development of fixed assets 2007 amount from either the use or disposal of the asset in question, has declined below its carrying 178 General information amount. 183 Recognition and measurement principles 183 Recognition of income and expenses 183 Intangible assets FINANCIAL INSTRUMENTS 184 Property, plant and equipment 184 Investment property Financial assets and liabilities (financial instruments) are recognized and measured in accor- 184 Investments accounted for dance with IAS 39. using the equity method 185 Impairment tests On this basis, financial assets are divided into the following categories according to the purpose 185 Financial instruments of their acquisition: 187 Other receivables and financial assets – financial assets measured at fair value through profit or loss, 187 Deferred tax – loans and receivables, 187 Inventories 188 Securities, cash and – held-to-maturity investments, cash equivalents – available-for-sale financial assets. 188 Provisions for pensions 188 Other provisions No financial assets in the category of “held-to-maturity investments” are in use within the Audi 188 Management’s estimates Group. and assessments 189 Notes to the Income Statement Financial liabilities are allocated to the following categories depending on the reason for their 196 Notes to the Balance Sheet 209 Additional disclosures acquisition: 227 Events occurring subsequent – financial liabilities measured at fair value through profit or loss, to the balance sheet date 228 Statement of Interests – financial liabilities measured at amortized cost. held by the Audi Group

Where financial instruments are purchased or sold in the customary manner, they are recognized using settlement date accounting, in other words at the value on the day on which the asset is delivered. Initial measurement of financial assets and liabilities is carried out at fair value. Subsequent measurement of financial instruments is dependent on the category assigned to the instrument in accordance with IAS 39 and is carried out either at amortized cost (using the effective interest method) or at fair value. Financial instruments are abandoned if the rights to payments from the investment have ex- pired or been transferred and the Audi Group has substantially transferred all risks and opportunities associated with their title. Evidence of the need for reclassification, and objective indicators for the impairment of a financial asset or group of financial assets, are reviewed on each balance sheet date. Financial assets include both originated and derivative claims or commitments, as detailed below.

Originated financial instruments The “Loans and receivables” and “Financial liabilities measured at amortized cost” categories include originated financial instruments measured at amortized cost. These include, in particular: – loans advanced, – trade receivables and payables, – other current assets and liabilities, – financial liabilities.

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The amortized cost of a financial asset or financial liability, using the effective interest method, is the amount at which a financial instrument was measured at initial recognition minus any principal repayments and any impairment losses. Receivables and liabilities denominated in foreign currencies are measured at the mean of the buying and selling rate on the balance sheet date. In the case of liabilities, amortized costs generally correspond to the nominal or settlement value. In the case of current items, the fair values to be additionally indicated in the Notes correspond to the amortized cost. For non-current assets and liabilities with more than one year to maturity, fair values are determined by discounting future cash flows at market rates. Liabilities from financial lease agreements are carried at the present value of the leasing installments. Available-for-sale financial assets include originated financial instruments that are designated as such or that cannot be allocated to any other IAS 39 category, and are as a general rule carried at fair value. In the case of listed financial instruments – exclusively securities in the case of the Audi Group – this corresponds to the market value on the balance sheet date. If no active market exists, fair value is determined using investment mathematics methods, for example by discounting future cash flows at the market rate or applying established option pricing models. The fluctuations in value of available-for-sale securities are initially accounted for within a separate equity reserve with no effect on income, after taking deferred tax into account. Unless there is evidence of lasting impairment, the financial result includes only capital gains or losses realized through disposal. If there is evidence of a lasting decline in value, the cumulative loss is removed from the equity reserve and recognized in the Income Statement. However, impairments already recorded in the Income Statement – to the extent that the securities concerned are equity instruments – are not reversed with an effect on income. If, on the other hand, the securities concerned are debt instruments, impairment losses are reversed with an effect on income if the increase in the fair value, when viewed objectively, is based on an event that oc- curred after the impairment loss was recorded with an effect on income.

Derivative financial instruments and hedge accounting Derivative financial instruments are used as a hedge against foreign exchange and commodity price risks for items on the Balance Sheet and for future cash flows. Futures, as well as options in the case of foreign exchange risks, are used for this purpose. A requirement of hedge accounting is that a clear hedging relationship between the underlying transaction and the hedge must be documented, and its effectiveness must be demonstrated. Recognition of the fair value changes in hedges depends on the nature of the hedging relationship. When hedging future cash flows, the fluctuations in the market value of the effective portion of a derivative financial instrument are initially reported in a special reserve within equity, with no effect on income, and are only recognized as income or expense once the hedged item is due. The ineffective portion of a hedge is recognized immediately in income. Derivative financial instruments that are used to hedge market risks according to commercial criteria but that do not fully meet the requirements of IAS 39 with regard to effectiveness of hedging relationships are classified as “financial instruments measured at fair value through profit or loss.” Their fair values are calculated as already detailed under “Available-for-sale financial assets.” Measurement takes place at market value.

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OTHER RECEIVABLES AND FINANCIAL ASSETS Consolidated Financial Statements 170 Income Statement Other receivables and financial assets (except for derivatives) are recognized at amortized cost. 171 Balance Sheet Provision is made for discernible non-recurring risks and general credit risks in the form of cor- 172 Cash Flow Statement 173 Statement of Changes in Equity responding value adjustments. Notes to the Consolidated Financial Statements

174 Development of DEFERRED TAX fixed assets 2008 176 Development of fixed assets 2007 Pursuant to IAS 12, deferred tax is determined according to the balance sheet-focused liability 178 General information method. This method specifies that tax deferrals are to be created for all temporary differences 183 Recognition and measurement principles between the tax base of assets and liabilities and their carrying amounts in the Consolidated 183 Recognition of income Balance Sheet (temporary concept). Deferred tax assets relating to carryforward of unused tax and expenses 183 Intangible assets losses must also be recognized. 184 Property, plant Deferrals amounting to the anticipated tax burden or tax relief in subsequent fiscal years are and equipment 184 Investment property created on the basis of the anticipated tax rate at the time of realization. In accordance with 184 Investments accounted for IAS 12, the tax consequences of distributions of profit are not recognized until the resolution on using the equity method 185 Impairment tests the appropriation of profits is adopted. 185 Financial instruments Deferred tax assets include future tax relief resulting from temporary differences between the 187 Other receivables and financial assets carrying amounts in the Consolidated Balance Sheet and the valuations in the Balance Sheet for 187 Deferred tax tax purposes. Deferred tax assets for carrying forward unused tax losses that can be realized in 187 Inventories 188 Securities, cash and the future and from tax relief must also be recognized. cash equivalents Deferred tax assets and deferred tax liabilities are netted if the tax creditors and maturities are 188 Provisions for pensions 188 Other provisions identical. 188 Management’s estimates Pursuant to IAS 1.70, deferred tax is reported as non-current. and assessments 189 Notes to the Income The carrying amount is reduced for deferred tax assets that are unlikely to be realized. Statement 196 Notes to the Balance Sheet 209 Additional disclosures 227 Events occurring subsequent INVENTORIES to the balance sheet date 228 Statement of Interests held by the Audi Group Raw materials and supplies are measured at the lower of average cost of acquisition or fair value (net realizable value). Generally, an average value or a value calculated on the basis of the FIFO (first in, first out) process is used. Other costs of purchase and purchase cost reductions are taken into account as appropriate. Work in progress and finished goods are valued at the lower of cost of conversion or fair value. Cost of conversion includes direct materials and direct productive wages, as well as a directly attributable portion of the necessary indirect materials and indirect labor, production-related depreciation and expenses attributable to the products from the amortization of capitalized production development costs. Distribution costs, general administrative expenses and interest on borrowings are not capitalized. Merchandise is valued at the lower of cost of purchase or fair value. Provision has been made for all discernible storage and inventory risks in the form of appropriate reductions in the carrying amounts. Individual adjustments are made on all inventories as soon as the probable proceeds realizable from their sale or use are lower than the carrying amounts of the inventories. The fair value is deemed to be the estimated proceeds of sale less the estimated costs incurred up until the sale.

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SECURITIES, CASH AND CASH EQUIVALENTS

Securities held as current assets are measured at market value, i.e. at the trading price on the balance sheet date. Cash and cash equivalents are stated at their market value, which corresponds to the nominal value.

PROVISIONS FOR PENSIONS

Actuarial measurement of provisions for pensions is based on the Projected Unit Credit Method for defined retirement benefit plans as specified in IAS 19 (Employee Benefits). This method takes account of pensions and entitlements to future pensions known at the balance sheet date as well as anticipated future pay and pension increases. Actuarial gains and losses are reported in a separate line item within equity, with no effect on income, after taking deferred tax into account.

OTHER PROVISIONS

In accordance with IAS 37, provisions are recognized if an obligation existing toward third parties is likely to lead to cash outflows and where the amount of the obligation can reliably be estimated. Pursuant to IAS 37, the other provisions for all discernible risks and uncertain liabilities are reported at their probable cost and are not offset against recourse entitlements. Provisions with over one year to maturity are measured at their discounted settlement value as of the balance sheet date. Market rates are used as the discount rates. Since the settlement value pursuant to IAS 37 also includes the cost increases to be taken into account on the balance sheet date, a nominal interest rate of 5.0 percent was applied in Germany.

MANAGEMENT’S ESTIMATES AND ASSESSMENTS

To some degree, the preparation of the Consolidated Financial Statements entails assumptions and estimates with regard to the level and disclosure of the recognized assets and liabilities, income and expenditure, and contingent liabilities for the reporting period. The assumptions and estimates relate principally to the reporting of intangible assets, the Group-wide determination of the useful life of property, plant and equipment and investment property, any impairment of fixed assets and inventories, the collectability of receivables and the recognition and measurement of provisions. The assumptions and estimates are based on premises that reflect the facts as known at any given time. The currently unforeseeable consequences of the global financial and economic crisis present a considerable forecast risk, meaning that developments beyond the management’s sphere of influence may result in differences between the actual amounts and the estimates originally anticipated. If the actual development varies from the anticipated development, the premises and, if necessary, the carrying amounts for the assets and liabilities in question are adjusted accordingly.

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NOTES TO THE INCOME STATEMENT Consolidated Financial Statements 170 Income Statement 1 Revenue 171 Balance Sheet The composition of the revenue of the Group, by brand, is as follows: 172 Cash Flow Statement 173 Statement of Changes in Equity

EUR million 2008 2007 Notes to the Consolidated Audi brand 25,534 25,249 Financial Statements 174 Development of Lamborghini brand 404 404 fixed assets 2008 Volkswagen brand 2,705 2,802 176 Development of SEAT brand 290 369 fixed assets 2007 178 General information Škoda brand 223 221 183 Recognition and Bentley brand 12 15 measurement principles 183 Recognition of income Vehicle sales 29,168 29,060 and expenses Other sales 5,028 4,557 183 Intangible assets Revenue 34,196 33,617 184 Property, plant and equipment 184 Investment property 184 Investments accounted for Vehicle revenue includes proceeds from the Audi Group from the sale of vehicles of the Audi and using the equity method Lamborghini brands as well as of other brands of the Volkswagen Group. 185 Impairment tests 185 Financial instruments Revenue from other sales primarily includes proceeds from the sale of engines and genuine 187 Other receivables and parts, and proceeds of AUDI BRUSSELS S.A./N.V. (Brussels, Belgium), which was consolidated financial assets 187 Deferred tax for the first time in the 2008 fiscal year, from the contract manufacture of VW Polo vehicles for 187 Inventories Volkswagen AG. 188 Securities, cash and cash equivalents Revenue is categorized by region for the purpose of segment reporting, analogously to the sys- 188 Provisions for pensions tem used for internal Group steering and reporting. 188 Other provisions 188 Management’s estimates and assessments 2 Cost of sales 189 Notes to the Income Statement Amounting to EUR 28,848 (28,478) million, cost of sales comprises the costs incurred in gener- 196 Notes to the Balance Sheet ating revenue and purchase prices in trading transactions. This item also includes expenses 209 Additional disclosures 227 Events occurring subsequent resulting from the formation of provisions for warranty costs, for development costs that can- to the balance sheet date not be capitalized, for scheduled and unscheduled amortization of capitalized development 228 Statement of Interests held by the Audi Group costs, and for property, plant and equipment for manufacturing purposes. The impairment losses were recorded on the basis of updated impairment tests and took particular account of market risks and exchange rate risks.

3 Distribution costs The distribution costs of EUR 3,240 (2,737) million substantially comprise labor and materials costs for marketing and sales promotion, advertising, public relations activities and outward freight, as well as depreciation attributable to the sales organization.

4 Administrative expenses Administrative expenses of EUR 302 (266) million include labor and materials costs, as well as depreciation attributable to administrative operations.

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5 Other operating income

EUR million 2008 2007 Income from derivative hedging transactions 642 359 Income from rebilling 304 402 Income from the processing of payments in foreign currency 171 56 Income from the release of provisions and accruals 163 142 Income from ancillary business 122 107 Income from the disposal of assets 5 8 Income from the reversal of reductions for impairment on receivables and other assets 2 7 Miscellaneous operating income 179 185 Total other operating income 1,588 1,266

Income from derivative hedging transactions mainly results from the settlement of currency hedging instruments. The total position in relation to hedging transactions is presented under Note 34.4, “Methods of monitoring the effectiveness of hedging relationships.” Income from ancillary business includes rental income from investment property in the amount of EUR 2 (2) million. Income from the processing of payments in foreign currency substantially comprises gains resulting from exchange-rate movements between the dates of output and payment, as well as exchange-rate gains resulting from measurement at the mean of the buying and selling rate on the closing date. Similarly, exchange rate losses are reported under other operating expenses.

6 Other operating expenses

EUR million 2008 2007 Expenses from the processing of payments in foreign currency 190 91 Expenses from derivative hedging transactions 160 230 Expenses from the allocation and recharging of costs 47 58 Impairment losses on receivables 30 14 Losses on the disposal of assets 25 11 Miscellaneous operating expenses 170 293 Total other operating expenses 622 697

Expenses from derivative hedging transactions mainly result from currency option premiums and the settlement of currency hedging instruments. The total position in relation to hedging transactions is presented under Note 34.4, “Methods of monitoring the effectiveness of hedging relationships.”

7 Result from investments accounted for using the equity method

EUR million 2008 2007 Income from investments accounted for using the equity method 57 48

Expenses from investments accounted for using the equity method – – 1 Result from investments accounted for using the equity method 57 47

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8 Financing costs Consolidated Financial Statements 170 Income Statement EUR million 2008 2007 171 Balance Sheet Interest and similar expenses – 132 – 153 172 Cash Flow Statement 173 Statement of Changes in Equity of which to affiliated companies – 130 – 152

Interest expense – 132 – 153 Notes to the Consolidated Interest effect from the measurement of provisions for pensions – 106 – 87 Financial Statements

Interest effect from the measurement of other provisions – 55 3 174 Development of fixed assets 2008 Interest on provisions – 161 – 84 176 Development of Financing costs – 293 – 237 fixed assets 2007 178 General information 183 Recognition and Interest income and expense are attributed on an accrual basis. measurement principles 189 Notes to the Income The positive interest effect in the prior year from the measurement of other provisions was Statement attributable to a rise in the discount rate following a rise in the domestic interest rate, and to 196 Notes to the Balance Sheet 209 Additional disclosures changed maturities. 227 Events occurring subsequent to the balance sheet date 228 Statement of Interests 9 Other financial results held by the Audi Group

EUR million 2008 2007 Investment result 123 5 Income from investments 39 25 Income from profit transfer agreements 4 5 Income from reversal of impairment losses on investments 70 – Income from the disposal of investments 33 3

Expenses from the transfer of losses – 16 – 7

Expenses from investments – 7 – 21

Net income from the sale of securities – 24 13

Impairments on securities – 60 – Income and expense from fair value measurement of derivative financial instruments 41 36 Interest and similar income 483 346 of which from affiliated companies 396 268 Other income 78 – of which from affiliated companies 78 – Total other financial results 641 400

Income from investments primarily relates to a share in the profits of Volkswagen Logistics GmbH & Co. OHG (Wolfsburg). Income from the reversal of impairment losses on investments and from the disposal of investments resulted from the sale of AUDI DO BRASIL E CIA. (Curitiba, Brazil). Following the removal of this company from the group of consolidated companies, all of the company’s assets and liabilities were subject to remeasurement under the rules of IFRS 5. In this regard, value adjustments made in previous years on an investment held by AUDI DO BRASIL E CIA. in a Brazil- ian partnership were reversed. This reinstatement resulted in extraordinary income of EUR 70 million. Additionally, a gain of EUR 33 million was realized from the sale of the investment. The income and expense from the fair value measurement of derivative financial instruments include the ineffective portions of cash flow hedges as well as fair value fluctuations in derivative financial instruments that do not fully meet the effectiveness criteria defined in IAS 39. The total position in relation to hedging instruments is presented under Note 34.4, “Methods of monitoring the effectiveness of hedging relationships.” Interest income is attributed on an accrual basis.

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10 Income tax expense Income tax expense includes taxes passed on by Volkswagen AG (Wolfsburg) on the basis of the single-entity relationship between the two companies for tax purposes, along with taxes owed by AUDI AG and its consolidated subsidiaries, as well as deferred taxes. Tax expense consists of the following:

EUR million 2008 2007 Actual income tax expense 983 1,355 of which for Germany 801 1,194 of which for other countries 182 161

of which income from the reversal of tax provisions – 1 – 1

Deferred tax income – 13 – 132

of which for Germany 52 – 99

of which for other countries – 65 – 33 Income tax expense 970 1,223

of which non-periodic tax expenses/income 1 – 1

EUR 799 (1,193) million of the actual income tax expense was passed on by Volkswagen AG. The actual taxes in Germany are calculated at a tax rate of 29.5 (38.3) percent. This represents the sum of the corporation income tax rate of 15.0 percent, the solidarity surcharge of 5.5 percent and the average trade earnings tax rate for the Group. The deferred taxes of domestic companies are calculated at a rate of 29.5 (29.5) percent. The impact on deferred taxes of the reduction in the rate of company tax was already taken into account during the prior year. The national income tax rates applicable for foreign companies range from 0 to 41 percent. The effects arising as a result of the tax benefits on research and development expenditure in Hungary are reported under tax-exempt income in the reconciliation accounts. The Audi Group has loss carryforwards totaling EUR 61 (61) million, of which the amount of EUR 57 (58) million can be used indefinitely. The realization of tax losses led to a reduction in current income tax expense of EUR 1 (19) million in the 2008 fiscal year. Deferred tax assets of EUR 149 (164) million were not reported due to impairment. Unused tax loss carryforwards accounted for EUR 2 (2) million of this amount, tax rebates for EUR 147 (162) million.

Of the deferred taxes reported in the Balance Sheet, a total of EUR 11 (– 161) million was recorded with a resulting increase in equity, without impacting the Income Statement. The reporting of actuarial gains or losses without affecting income in accordance with IAS 19 led to a reduction in equity during the current fiscal year, due to the formation of deferred taxes in the

amount of EUR 17 (– 40) million. The change from deferred taxes to effects recognized in equity

capital for derivative financial instruments led to an increase of EUR 28 (– 121) million in equity.

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The reporting and measurement differences in the individual Balance Sheet items can be attrib- Consolidated Financial uted to the following deferred tax assets and liabilities carried in the Balance Sheet: Statements 170 Income Statement 171 Balance Sheet EUR million Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 172 Cash Flow Statement 173 Statement of Changes in Equity Deferred tax assets Deferred tax liabilities Notes to the Consolidated Intangible assets 101 100 459 441 Financial Statements Property, plant and equipment 200 199 217 175 174 Development of Long-term investments 133 109 – – fixed assets 2008 176 Development of Inventories 80 49 40 39 fixed assets 2007 Receivables and other assets 56 43 339 281 178 General information Other current assets 34 50 – – 183 Recognition and measurement principles Provisions for pensions 81 113 3 – 189 Notes to the Income Other provisions 910 866 49 71 Statement 196 Notes to the Balance Sheet Liabilities 89 115 15 16 209 Additional disclosures Loss carryforwards 10 10 – – 227 Events occurring subsequent Gross value 1,694 1,654 1,122 1,023 to the balance sheet date 228 Statement of Interests of which non-current 1,145 1,096 596 549 held by the Audi Group

Offsetting measures – 994 – 971 – 994 – 971

Consolidation measures – 9 – 23 – 50 – 47 Carrying amount 691 660 78 5

Deferred taxes are explained in detail in the recognition and measurement principles.

Reconciliation of anticipated and reported income tax expense The anticipated tax expense is lower than the reported tax expense. The reasons for the difference between the anticipated and the reported tax expense can be found in the reconciliation accounts as follows:

EUR million 2008 2007 Profit before tax 3,177 2,915

Anticipated income tax expense 29.5 % (38.3 %) 937 1,116 Reconciliation:

Divergent foreign tax burden 17 – 96 Tax portion for:

tax-exempt income – 127 – 87 expenses not deductible for tax purposes 30 89 temporary differences and losses for which no deferred tax has been recorded 124 114

Non-periodic tax income 1 – 1 Effects of tax rate changes 3 142

Other tax effects – 15 – 54 Income tax expense reported 970 1,223 Effective tax rate in % 30.5 42.0

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11 Profit transfer to Volkswagen AG The amount of EUR 1,230 (1,412) million will be transferred to Volkswagen AG (Wolfsburg) under the profit transfer agreement with AUDI AG.

12 Earnings per share Basic earnings per share are calculated by dividing the share of profit due to AUDI AG stockholders by the weighted average number of shares in circulation during the fiscal year. In the case of AUDI AG, the diluted earnings per share are the same as the basic earnings per share, since there were no potential shares of AUDI AG in existence at either December 31, 2008 or December 31, 2007.

2008 2007 Profit share of AUDI AG stockholders (EUR million) 2,178 1,654 Weighted average number of shares (basic and diluted totals are identical) 43,000,000 43,000,000 Earnings per share in EUR 50.66 38.46

Outside stockholders of AUDI AG will receive a compensatory payment for each no-par share in lieu of a dividend for the 2008 fiscal year. The level of this payment corresponds to the dividend that is paid on one ordinary share of Volkswagen AG (Wolfsburg). The dividend payment will be resolved by the Annual General Meeting of Volkswagen AG on April 23, 2009.

13 Additional disclosures on financial instruments in the Income Statement

Categories Financial instruments are categorized as follows in accordance with IFRS 7: – Measured at fair value, – Measured at amortized cost, – Not under scope of IFRS 7.

Those financial instruments not within the scope of IFRS 7 are investments accounted for using the equity method, which are neither financial instruments as defined in IAS 39 nor financial instruments as defined in IFRS 7.

Net results for financial instruments The net results for financial instruments – as categorized under IAS 39 – are as follows:

EUR million 2008 2007

Financial instruments at fair value through profit or loss – 30 42

Loans and receivables – 147 – 140 Available-for-sale financial assets 448 361 Measured at amortized cost – –

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The net results for financial instruments include the net income or expense from interest, fair Consolidated Financial value measurements, foreign currency translation, reductions for impairment and disposal Statements 170 Income Statement gains. 171 Balance Sheet The “Financial instruments at fair value through profit or loss” category presents the results 172 Cash Flow Statement 173 Statement of Changes in Equity from the settlement and measurement of commodity futures. The “Loans and receivables” category essentially consists of factoring expenses. The net result for available-for-sale Notes to the Consolidated Financial Statements financial assets predominantly comprises income from financial investments and investments 174 Development of in securities. fixed assets 2008 The financial instruments are accounted for and measured in accordance with IAS 39 and are 176 Development of fixed assets 2007 described in the recognition and measurement principles under “Financial instruments.” 178 General information 183 Recognition and measurement principles Interest income and expense for financial instruments not measured at fair value 189 Notes to the Income Statement 196 Notes to the Balance Sheet EUR million 2008 2007 209 Additional disclosures Interest income 26 28 227 Events occurring subsequent to the balance sheet date Interest expense – 94 – 153 228 Statement of Interests Interest income and expense – 68 – 125 held by the Audi Group

Interest income and expense for financial instruments not measured at fair value constitute part of the net result for financial instruments, which come under the category of “Loans and receivables.” Interest expense here largely comprises factoring expenses arising in connection with the loan asset sales to subsidiaries of Volkswagen AG (Wolfsburg) that do not belong to the Audi Group.

Impairment losses for financial assets by category

EUR million 2008 2007 Measured at fair value 60 – Measured at amortized cost 37 35 Impairment losses 97 35

The impairment losses relate to value adjustments of financial assets, such as value adjustments of receivables, securities and non-consolidated subsidiaries. No impairment was applied to financial instruments falling outside the scope of IFRS 7.

Gains and losses from hedging activities From the cash flow hedge reserve the sum of EUR 553 (298) million was included under other operating expenses.

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NOTES TO THE BALANCE SHEET

14 Intangible assets

EUR million Dec. 31, 2008 Dec. 31, 2007 Concessions, industrial property rights and similar rights and assets, as well as licenses thereto 170 99 Capitalized development costs Products currently under development 488 472 Products currently in use 1,452 1,451 Payments on account for intangible assets 2 – Total 2,112 2,022

Research and development expenditure recognized as an expense

EUR million 2008 2007 Research expense and non-capitalized development costs 1,631 1,570 Amortization and disposals of capitalized development costs 530 656 Total 2,161 2,226

A total of EUR 2,178 (2,067) million was spent on research and development in the 2008 fiscal year. Of this total, EUR 547 (497) million fulfilled the capitalization criteria set out in IAS 38.

15 Property, plant and equipment

EUR million Dec. 31, 2008 Dec. 31, 2007 Land, land rights and buildings, including buildings on land owned by others 1,999 1,748 Plant and machinery 1,211 1,236 Other plant and office equipment 2,033 1,743 of which finance leases 1 3 Payments on account and assets under construction 603 451 Total 5,846 5,178

The carrying amounts in the case of finance leases correspond to the fair values. Payments totaling EUR 83 (67) million for assets rented on the basis of operating lease agreements were recognized as an expense. There are no significant restrictions on ownership and disposal for the reported property, plant and equipment.

16 Investment property Land and buildings held for the purpose of generating rental income (investment property) are reported under investment property pursuant to IAS 40. The fair value of investment property, based on valuations, was EUR 7 (12) million.

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17 Other long-term investments Consolidated Financial Statements 170 Income Statement EUR million Dec. 31, 2008 Dec. 31, 2007 171 Balance Sheet Investments in affiliated companies 64 40 172 Cash Flow Statement Participating interests 9 9 173 Statement of Changes in Equity

Securities 2 – Notes to the Consolidated Total 75 49 Financial Statements

174 Development of fixed assets 2008 18 Deferred tax assets 176 Development of fixed assets 2007 The temporary differences between tax bases and carrying amounts in the Consolidated Finan- 178 General information cial Statements are explained under “Deferred tax” in the recognition and measurement princi- 183 Recognition and measurement principles ples, and under Note 10, “Income tax expense.” 189 Notes to the Income Pursuant to IAS 1, deferred tax assets are reported as non-current assets, irrespective of their Statement 196 Notes to the Balance Sheet maturities. 200 Equity 203 Liabilities 209 Additional disclosures 19 Other receivables and other financial assets 227 Events occurring subsequent to the balance sheet date 228 Statement of Interests Non-current other receivables and other financial assets held by the Audi Group

EUR million Dec. 31, 2008 Dec. 31, 2007 Loans advanced to affiliated companies 58 28 Other loans advanced 1 1 Other receivables from affiliated companies 572 240 of which from positive fair values of derivative financial instruments 555 222 Other tax assets 2 6 Other assets 23 11 Total 656 286

The loans advanced have a fair value of EUR 59 (28) million. The miscellaneous non-current assets have a fair value of EUR 590 (260) million. Derivative financial instruments are measured at market value. The total position in relation to hedging instruments is presented under Note 34.4, “Methods of monitoring the effectiveness of hedging relationships.” The reported receivables and other assets are not subject to any significant restrictions on ownership or disposal.

Current other receivables and other financial assets

EUR million Dec. 31, 2008 Dec. 31, 2007 Other receivables from affiliated companies 4,975 994 of which from positive fair values of derivative financial instruments 569 679 of which fixed-term deposits and loans extended 4,285 284 Other receivables from associated companies 6 – Other tax assets 75 68 Positive fair values of derivative financial instruments 10 – Other assets 252 303 Total 5,318 1,365

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All current other receivables and financial assets are due within one year of the balance sheet date. The carrying amounts correspond to the fair values. The other assets include EUR 8 (33) million in refund entitlements from the German Federal Employment Agency for the implementation of partial early retirement plans.

The positive fair values of derivative financial instruments are composed as follows:

EUR million Dec. 31, 2008 Dec. 31, 2007 Transactions to hedge against currency risks from future payment streams (cash flow hedges) 1,004 849 commodity price risks from future payment streams (cash flow hedges) 1 – Assets from hedge-ineffective derivatives 129 52 Positive fair values of derivative financial instruments 1,134 901

20 Inventories

EUR million Dec. 31, 2008 Dec. 31, 2007 Raw materials and supplies 364 372 Work in progress 332 287 Finished goods and merchandise 2,651 2,002 Total 3,347 2,661

Inventories amounting to EUR 28,898 (28,450) million were recorded as cost of sales at the same time that revenue from them was realized. The impairment resulting from the measurement of inventories on the basis of sales markets amounted to EUR 89 (30) million. No reversal of write-downs was performed in the fiscal year. Of the finished goods inventory, a portion of the company car fleet valued at EUR 94 (98) million has been pledged as collateral for commitments toward employees under the partial early retirement block model. The other reported inventories are not subject to any significant restrictions on ownership or disposal.

21 Trade receivables

EUR million Dec. 31, 2008 Dec. 31, 2007 Trade receivables from third parties 1,223 1,148 affiliated companies 757 840 associated companies and participating interests 235 161 Total 2,215 2,149

The carrying amounts of the trade receivables correspond to the fair values due to their short- term nature. Those trade receivables that will not be realized until more than 12 months subsequent to the balance sheet date amount to EUR 1 (3) million. The value adjustments in relation to trade receivables are listed under Note 34.1, “Credit risks.”

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22 Effective income tax Consolidated Financial Entitlements to income tax rebates, predominantly for foreign Group companies, are reported Statements 170 Income Statement under this item. 171 Balance Sheet 172 Cash Flow Statement 173 Statement of Changes in Equity 23 Securities, cash and cash equivalents Securities include fixed or variable-interest securities and equities in the amount of EUR 789 Notes to the Consolidated Financial Statements (1,333) million. 174 Development of Cash and cash equivalents essentially comprise credit balances with banks and affiliated com- fixed assets 2008 panies amounting to EUR 4,833 (6,740) million. The credit balances with banks are held at 176 Development of fixed assets 2007 various banks in various different currencies. As part of the cash pool arrangement, liquid assets 178 General information were invested with affiliated companies. 183 Recognition and measurement principles 189 Notes to the Income Statement 196 Notes to the Balance Sheet 200 Equity 203 Liabilities 209 Additional disclosures 227 Events occurring subsequent to the balance sheet date 228 Statement of Interests held by the Audi Group

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EQUITY

24 Changes in equity

EUR million Issued capital Capital reserve

Position as of Jan. 1, 2007 110 483 Currency adjustments – – Transfer to retained earnings – – Changes in measurement not recognized in income – – Result from securities – – Result from settled cash flow hedges – – Deferred tax items netted directly against equity – – Minority interests – – Capital contributions – 428 Other changes – – Difference resulting from changes in the group of consolidated companies – – Position as of Dec. 31, 2007 110 911 Position as of Jan. 1, 2008 110 911 Currency adjustments – – Transfer to retained earnings – – Changes in measurement not recognized in income – – Result from securities – – Result from settled cash flow hedges – – Deferred tax items netted directly against equity – – Minority interests – – Capital contributions – 706 Other changes – – Difference resulting from changes in the group of consolidated companies – – Position as of Dec. 31, 2008 110 1,617

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Retained earnings Equity

Legal reserve Reserve for Provisions for Investments and other Currency Reserve for remeasurement pensions and accounted for AUDI AG retained exchange cash flow to fair value of similar using the equity stockholders’ Minority earnings reserve hedges securities obligations method interests interests Total

6,682 – 15 197 – 1 – 177 – 14 7,265 – 7,265

– 4 – – – – 14 – 10 – – 10 242 – – – – – 242 – 242 – – 819 33 51 – 903 – 903

– – – – 50 – – – 50 – – 50

– – – 298 – – – – 298 – – 298

– – – 126 5 – 40 – – 161 – – 161 – – – – – – – 38 38 – – – – – – 428 5 433 1 – – – – – 1 – 1

– 8 – – – – – – 8 – – 8

6,917 – 11 592 – 13 – 166 – 28 8,312 43 8,355

– 5 – – – 1 15 19 5 24 948 – – – – – 948 – 948

– – 476 – 130 54 – 400 3 403 – – – 114 – – 114 – 114

– – – 553 – – 2 – 551 – – 551

– – 23 5 – 16 – 12 – 1 11 – – – – – – – 29 29 – – – – – – 706 – 706 – – – – – – – – – – – – – – – – 289 289

7,865 – 6 538 – 24 – 129 – 11 9,960 368 10,328

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The share capital of AUDI AG is EUR 110,080,000.00. One share grants an arithmetical share of EUR 2.56 in the company’s capital. This capital is divided into 43,000,000 no-par bearer shares. The capital reserves contain premiums paid in connection with the issuance of shares of the Company. In the year under review, capital reserves rose to EUR 1,617 million as a result of a contribution in the amount of EUR 706 million by Volkswagen AG (Wolfsburg) to the capital reserve of AUDI AG. The opportunities and risks under foreign exchange contracts, currency option transactions and commodity price hedging transactions serving as hedges for future cash flows are deferred in the reserve for cash flow hedges with no effect on the Income Statement. When the cash flow hedges become due, the results from the settlement of the exchange-rate hedging contracts are reported under other operating income or expenses. Unrealized gains and losses from the measurement at fair value of financial assets available for sale are recognized in the reserve for the market-price measurement of securities. Upon disposal of the securities, share price gains and losses realized are reported under the financial result. Adjustments to actuarial assumptions on retirement benefit obligations, with no effect on income, are recognized in the provisions for pensions and similar obligations. Pursuant to IAS 28.39, foreign currency translation differences that do not affect income from the accounting of FAW-Volkswagen Automotive Company, Ltd. (Changchun, China) using the equity method were included in the reserve for investments accounted for using the equity method. The shares held by minority interests in the equity capital can be broken down as follows, with each shareholder holding 100 percent of the shares in the listed companies and to whom the result achieved by the company is attributable:

Fully consolidated group company Minority interests AUDI BRUSSELS S.A./N.V., Brussels (Belgium) Volkswagen AG, Wolfsburg Audi of America, LLC, Herndon (USA) VOLKSWAGEN GROUP OF AMERICA, INC., Herndon (USA) Audi Canada Inc., Ajax (Canada) Volkswagen Group Canada, Inc., Ajax (Canada)

The balance of EUR 948 (242) million remaining after the transfer of profit to Volkswagen AG is allocated to the other retained earnings.

Stock option plan Under the stock option plan of Volkswagen AG (Wolfsburg), the members of the Board of Man- agement and selected senior managers of the Audi Group were granted the right to acquire stock options for shares of Volkswagen AG by subscribing convertible bonds. In the 1999 to 2006 fiscal years, a total of eight tranches of the stock option plan were issued. The stock option plan was not extended for the period beyond 2006. Each convertible bond may be converted into ten ordinary shares. Conversion may take place for the first time after a qualifying period of 24 months and then until a period of five years from the date of issuance of the convertible bond has elapsed. For details relating to the terms of subscription and exercise, please refer to the notes on equity in the Annual Report of Volks- wagen AG. The convertible bonds are measured at fair value at the time of issue; in accordance with the transitional provisions of IFRS 2, only convertible bonds granted after publication of the draft standard on November 7, 2002, are affected. The fair value of the convertible bonds is determined using a binomial option pricing model, and reported as personnel costs on a pro rata basis over the 24-month qualifying period and under other changes in equity for AUDI AG. In conjunction with the eighth and final tranche of the stock option plan, expenses of EUR 0.2 million were incurred for the last time in 2008. The corresponding expense for the previous fiscal year was EUR 0.5 million.

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The inventory as of January 1, 2008 amounted to 10,750 convertible bonds from the eighth Consolidated Financial tranche. In the 2008 fiscal year, all 10,750 convertible bonds were converted at a weighted Statements 170 Income Statement average exercise price of EUR 2,073.00. The average weighted conversion price per convertible 171 Balance Sheet bond (conversion price per ten equities) was EUR 640.54. On December 31, 2008 no further 172 Cash Flow Statement 173 Statement of Changes in Equity convertible bonds from the stock option plan were held. Notes to the Consolidated Financial Statements

174 Development of LIABILITIES fixed assets 2008 176 Development of fixed assets 2007 25 Financial liabilities 178 General information 183 Recognition and measurement principles Non-current financial liabilities 189 Notes to the Income Statement 196 Notes to the Balance Sheet EUR million Dec. 31, 2008 Dec. 31, 2007 200 Equity Liabilities to banks 3 3 203 Liabilities 209 Additional disclosures Liabilities from financial lease agreements – 1 227 Events occurring subsequent Total 3 4 to the balance sheet date 228 Statement of Interests held by the Audi Group Non-current financial liabilities having a time to maturity of more than five years amount to EUR 1 (1) million. The carrying amounts correspond to the fair values.

Current financial liabilities

EUR million Dec. 31, 2008 Dec. 31, 2007 Liabilities to affiliated factoring companies 574 479 Loans from affiliated companies 62 34 Liabilities to banks 36 12 Liabilities from financial lease agreements 1 2 Total 673 527

Measurement of the non-current and current financial lease agreements is based on market interest rates in each case. The carrying amounts correspond to the fair values due to the short-term maturities.

26 Deferred tax liabilities The temporary differences between tax bases and carrying amounts in the Consolidated Finan- cial Statements are explained under “Deferred tax” in the recognition and measurement principles, and under Note 10, “Income tax expense.” Pursuant to IAS 1, deferred tax liabilities are reported as non-current liabilities, irrespective of their maturities.

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27 Other liabilities The derivative currency hedging instruments reported under other liabilities are measured at market values. The total item of currency hedging instruments is presented under Note 34, “Management of financial risks.”

Non-current other liabilities

EUR million Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007

Carrying amounts Fair values Liabilities to affiliated companies 356 191 337 173 of which from negative fair values of derivative financial instruments 122 23 122 23 Other liabilities 91 97 89 97 of which relating to social insurance 28 30 28 30 Total 447 288 426 270

Liabilities having a time to maturity of more than five years amount to EUR 168 (117) million.

Current other liabilities

EUR million Dec. 31, 2008 Dec. 31, 2007 Liabilities to affiliated companies 1,738 1,754 of which from negative fair values of derivative financial instruments 120 25 Liabilities to associated companies 6 31 Advances received for orders from customers 238 238 Other liabilities 1,112 990 of which taxes 147 107 of which relating to social insurance 109 105 of which from negative fair values of derivative financial instruments – 3 Total 3,094 3,013

The negative fair values of derivative financial instruments are composed as follows:

EUR million Dec. 31, 2008 Dec. 31, 2007 Transactions to hedge against currency risks from future payment streams (cash flow hedges) 125 49 commodity price risks from future payment streams (cash flow hedges) 70 – Assets from hedge-ineffective derivatives 47 2 Negative fair values of derivative financial instruments 242 51

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28 Provisions for pensions Consolidated Financial Provisions for pensions are created on the basis of plans to provide retirement, disability and Statements 170 Income Statement surviving dependant benefits. The benefit amounts are generally contingent on the length of 171 Balance Sheet service and the remuneration of the employees. 172 Cash Flow Statement 173 Statement of Changes in Equity Both defined contribution and defined benefit plans exist within the Audi Group for retirement benefit arrangements. In the case of defined contribution plans, the Company pays contribu- Notes to the Consolidated Financial Statements tions to public or private-sector pension plans on the basis of statutory or contractual require- 174 Development of ments, or on a voluntary basis. Payment of the contributions releases the Company from any fixed assets 2008 other benefit obligations. Current contribution payments are reported as an expense for the 176 Development of fixed assets 2007 year in question. With regard to the Audi Group they total EUR 258 (237) million. Of this, con- 178 General information tributions of EUR 239 (220) million were paid in Germany towards statutory pension insurance. 183 Recognition and measurement principles The retirement benefit systems are based predominantly on defined benefit plans, with a dis- 189 Notes to the Income tinction being made between systems based on provisions and externally financed benefit Statement 196 Notes to the Balance Sheet systems. 200 Equity The domestic and foreign benefit claims of those with entitlement to a pension from the com- 203 Liabilities 209 Additional disclosures pany pension scheme are calculated in accordance with IAS 19 (Employee Benefits) on the basis 227 Events occurring subsequent of the Projected Unit Credit Method. This measures future obligations on the basis of the pro to the balance sheet date 228 Statement of Interests rata benefit entitlements acquired as of the balance sheet date. For purposes of measurement, held by the Audi Group trend assumptions are used for the relevant variables affecting the level of benefits. The retirement benefit scheme within the Audi Group was evolved into a pension fund model in Germany on January 1, 2001. The retirement benefit commitments for this model are also classified as defined benefits in accordance with the requirements of IAS 19. The remuneration- based annual cost of providing employee benefits is invested in mutual funds on a fiduciary basis by Volkswagen Pension Trust e.V. (Wolfsburg). This model offers employees the opportunity of increasing their pension entitlements, while providing full risk coverage. As the mutual fund units administered on a fiduciary basis satisfy the requirements of IAS 19 as plan assets, these funds were offset against the derived retirement benefit obligations. The amounts recorded in the Balance Sheet for benefit commitments are presented in the following table:

EUR million Dec. 31, 2008 Dec. 31, 2007 Present value of externally funded defined benefit obligations 464 368 Fair value of plan assets 471 368

Financing status (balance) – 7 – Due to the limit on a defined benefit asset amount not capitalized under IAS 19 7 – Present value of defined benefit obligations not externally funded 1,946 1,957 Provisions for pensions recognized in the Balance Sheet 1,946 1,957

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The present value of the defined benefit commitments changed as follows:

EUR million 2008 2007 Present value on January 1 2,325 2,280 Changes in the group of consolidated companies and first-time adoption of IAS 19 91 8 Service cost 64 79 Interest cost 129 104

Actuarial gains (-) / losses (+) – 111 – 70

Pension payments from company assets – 72 – 69

Effects from transfers 2 – 6

Pension payments from fund assets – 19 –

Currency differences 1 – 1 Present value on December 31 2,410 2,325

The reconciliation for the fair value of the plan assets is as follows:

EUR million 2008 2007 Plan assets on January 1 368 306 Changes in the group of consolidated companies and first-time adoption of IAS 19 86 – Expected return on plan assets 23 17

Actuarial gains (+) / losses (-) – 47 – 19 Employer contributions 59 64

Benefits paid – 19 – Effects of transfers 1 – Plan assets on December 31 471 368

In the past fiscal year, actual losses from the plan assets amounted to EUR 26 million. The long-term overall yield on the plan assets is determined on a uniform basis and depends on the actual long-term earnings of the portfolio, historical overall market yields and a forecast of the anticipated yields of the classes of security in the portfolio. Employer contributions to the fund assets totaling EUR 60 (52) million are expected for the following fiscal year. The composition of fund assets is as follows, by category:

% of fund assets Dec. 31, 2008 Dec. 31, 2007 Shares 13.9 38.0 Fixed-income securities 45.0 53.8 Cash 25.2 8.2 Other 15.9 0.0 100.0 100.0

Actuarial gains and losses result from changes in the entitlement base and from deviations in the actual trends (e.g. increases in pay or retirement benefits) from the figures assumed for calculation purposes. In accordance with the requirements of IAS 19, such gains and losses are recognized without affecting income under a separate line item within equity, taking deferred tax into account.

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The following amounts were recognized in the Income Statement: Consolidated Financial Statements 170 Income Statement EUR million 2008 2007 171 Balance Sheet Current service cost for services provided by the employees in the fiscal year – 64 – 79 172 Cash Flow Statement 173 Statement of Changes in Equity Interest cost – 129 – 104

Expected return on plan assets 23 17 Notes to the Consolidated Total – 170 – 166 Financial Statements

174 Development of fixed assets 2008 The interest element in pension costs is shown under financing costs. The expected return on 176 Development of fixed assets 2007 plan assets is also shown under this item. 178 General information The provisions for pensions recognized in the Balance Sheet are determined by offsetting the 183 Recognition and measurement principles present value against the fund assets pursuant to IAS 19. The net liability recognized as provi- 189 Notes to the Income sions for pensions developed as follows: Statement 196 Notes to the Balance Sheet 200 Equity EUR million 2008 2007 203 Liabilities Provisions for pensions on January 1 1,957 1,974 209 Additional disclosures 227 Events occurring subsequent Changes in the group of consolidated companies and to the balance sheet date first-time adoption of IAS 19 5 8 228 Statement of Interests Employee benefit expenses 170 166 held by the Audi Group

Actuarial gains (-) / losses (+) – 57 – 51

Pension payments from company assets – 72 – 69

Contributions paid to external pension funds – 59 – 64 Transfers received from affiliated companies 2 1

Transfers made to affiliated companies – 1 – 7

Currency differences 1 – 1 Provisions for pensions on December 31 1,946 1,957 of which non-current 1,880 1,891

The experience-based adjustments, i.e. the effects of differences between actuarial assumptions and what has actually transpired, are presented in the following table:

% 2008 2007 Difference between anticipated and actual performance

as % of the present value of the obligation 0.17 – 1.46

as % of the fair value of the plan assets – 9.88 – 5.26

In detail, the calculation of the retirement benefit obligations is based on the following actuarial assumptions (weighted average):

% Dec. 31, 2008 Dec. 31, 2007 Remuneration trend 2.50 2.50 Retirement benefit trend 1.60 1.60 Discount rate 5.75 5.50 Staff turnover rate 1.20 1.40 Anticipated yield on plan assets 5.00 5.00

The “2005 G Reference Tables” published by HEUBECK-RICHTTAFELN-GmbH served as the bio- metric basis for calculation of retirement benefits.

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29 Effective income tax obligations Effective income tax obligations consist primarily of tax liabilities to Volkswagen AG (Wolfsburg) under allocation plans.

30 Other provisions

EUR million Dec. 31, 2008 Dec. 31, 2007

Of which due Of which due Total within one year Total within one year Obligations from sales operations 4,004 1,722 3,630 1,647 Workforce-related provisions 531 151 511 107 Other provisions 669 629 531 491 Total 5,204 2,502 4,672 2,245

Obligations from sales operations primarily comprise warranty claims from the sale of vehicles, components and genuine parts, including the disposal of end-of-life vehicles. These are predominantly warranty claims that are determined on the basis of previous or estimated future loss experience. This item additionally includes rebates, bonuses and similar discounts due to be granted and arising subsequent to the balance sheet date but occasioned by revenue prior to the balance sheet date. The workforce-related provisions are created for such purposes as service anniversary awards, partial early retirement arrangements, proposals for improvements and settlement payments. The refund claims against the German Federal Employment Agency as part of implementation of the partial early retirement model are reported under other assets (Note 19, “Other receivables and other financial assets”). The other provisions relate to various one-off obligations. The composition of other provisions by anticipated outflow date will be 48 percent in the following year, 46 percent in the years 2010 through 2013 and 6 percent thereafter.

The provisions developed as follows:

Changes in the group of Interest Jan. 1, consolidated effect from Dec. 31, EUR million 2008 companies Utilization Dissolution Addition measurement 2008 Obligations from sales operations 3,630 1 1,245 44 1,618 44 4,004 Workforce-related provisions 511 47 70 10 43 10 531 Other provisions 531 4 163 32 328 1 669 Total 4,672 52 1,478 86 1,989 55 5,204

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31 Trade payables Consolidated Financial Statements 170 Income Statement EUR million Dec. 31, 2008 Dec. 31, 2007 171 Balance Sheet Trade payables to 172 Cash Flow Statement third parties 2,820 2,236 173 Statement of Changes in Equity

affiliated companies 475 550 Notes to the Consolidated associated companies 7 8 Financial Statements Total 3,302 2,794 174 Development of fixed assets 2008 176 Development of fixed assets 2007 The fair values of the trade payables correspond to the carrying amounts due to their short-term 178 General information nature. 183 Recognition and measurement principles The customary retention of title applies to liabilities from deliveries of goods. 189 Notes to the Income Statement 196 Notes to the Balance Sheet 200 Equity ADDITIONAL DISCLOSURES 203 Liabilities 209 Additional disclosures 227 Events occurring subsequent 32 Capital management to the balance sheet date 228 Statement of Interests The primary goal of capital management within the Audi Group is to assure financial flexibility held by the Audi Group in order to achieve business and growth targets, and to enable continuous, steady growth in the value of the Company. The capital structure is steered specifically with this in mind, and the economic environment is kept under constant observation. The objectives, methods and procedures for optimizing capital management remained unchanged on December 31, 2008. The equity and financial liabilities from the transfer of profit are summarized in the following table:

EUR million Dec. 31, 2008 Dec. 31, 2007 Equity 10,328 8,355 as % of total capital 84 81 Financial liabilities from the transfer of profit 1,906 1,943 Current financial liabilities 673 527 Non-current financial liabilities 3 4 Liabilities from the transfer of profit 1,230 1,412 as % of total capital 16 19 Total capital 12,234 10,298

Around 99.55 percent of the issued capital is held by Volkswagen AG (Wolfsburg), with which a control and profit transfer agreement exists. In the 2008 fiscal year, equity rose by 23.6 percent as compared to the prior year. This was substantially attributable to a cash injection to the capital reserve by Volkswagen AG and to the allocation to other retained earnings.

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33 Additional disclosures on financial instruments in the Balance Sheet

Carrying amounts of financial instruments The following table presents a reconciliation of the carrying amounts of the Balance Sheet items with the individual IFRS 7 categories:

Carrying amount as per balance sheet as of Measured at fair value EUR million Dec. 31, 2008 through profit or loss Available for sale ASSETS Non-current Other long-term investments 75 – 75 Other receivables and assets 656 – – of which from positive fair values of derivative financial instruments 555 – – miscellaneous other receivables and assets 101 – – Current Trade receivables 2,215 – – Other receivables and assets 5,318 – – of which from positive fair values of derivative financial instruments 579 129 – miscellaneous other receivables and assets 4,739 – – Securities 789 – 789 Cash and cash equivalents 4,833 – 4,833 Total financial assets 13,886 129 5,697

LIABILITIES AND SHAREHOLDERS’ EQUITY Non-current Financial liabilities 3 – – Other liabilities 447 – – of which from negative fair values of derivative financial instruments 122 17 – miscellaneous other liabilities 325 – – Current Financial liabilities 673 – – Trade payables 3,302 – – Other liabilities 3,094 – – of which from negative fair values of derivative financial instruments 120 30 – miscellaneous other liabilities 2,974 – – Total financial liabilities 7,519 47 –

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Assignment to IAS 39 categories Division into classes of IFRS 7

Financial liabilities Loans and measured at Not classified Measured at Measured at Not classified receivables amortized cost under IAS 39 fair value amortized cost under IFRS 7

– – – 2 73 – – – – – – – – – 555 555 – – 90 – 11 – 90 11

2,215 – – – 2,215 – – – – – – – – – 450 579 – – 4,553 – 186 – 4,553 186 – – – 789 – – – – – 4,833 – – 6,858 – 1,202 6,758 6,931 197

– 3 – – 3 – – – – – – – – – 105 122 – – – 4 321 – 4 321

– 673 – – 673 – – 3,302 – – 3,302 – – – – – – – – – 90 120 – – – 1,650 1,324 – 1,650 1,324 – 5,632 1,840 242 5,632 1,645

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Carrying amount as per balance sheet as of Measured at fair value EUR million Dec. 31, 2007 through profit or loss Available for sale ASSETS Non-current Other long-term investments 49 – 49 Other receivables and assets 286 – – of which from positive fair values of derivative financial instruments 222 45 – miscellaneous other receivables and assets 64 – – Current Trade receivables 2,149 – – Other receivables and assets 1,365 – – of which from positive fair values of derivative financial instruments 679 7 – miscellaneous other receivables and assets 686 – – Securities 1,333 – 1,333 Cash and cash equivalents 6,740 – 6,740 Total financial assets 11,922 52 8,122

LIABILITIES AND SHAREHOLDERS’ EQUITY Non-current Financial liabilities 4 – – Other liabilities 288 – – of which from negative fair values of derivative financial instruments 23 – – miscellaneous other liabilities 265 – – Current Financial liabilities 527 – – Trade payables 2,794 – – Other liabilities 3,013 – – of which from negative fair values of derivative financial instruments 28 2 – miscellaneous other liabilities 2,985 – – Total financial liabilities 6,626 2 –

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Assignment to IAS 39 categories Division into classes of IFRS 7

Financial liabilities Loans and measured at Not classified Measured at Measured at Not classified receivables amortized cost under IAS 39 fair value amortized cost under IFRS 7

– – – – 49 – – – – – – – – – 177 222 – – 58 – 6 – 58 6

2,149 – – – 2,149 – – – – – – – – – 672 679 – – 435 – 251 – 435 251 – – – 1,333 – – – – – 6,740 – – 2,642 – 1,106 8,974 2,691 257

– 4 – – 4 – – – – – – – – – 23 23 – – – 9 256 – 9 256

– 527 – – 527 – – 2,794 – – 2,794 – – – – – – – – – 26 28 – – – 1,695 1,290 – 1,695 1,290 – 5,029 1,595 51 5,029 1,546

The fair values of financial assets and liabilities within the “measured at amortized cost” category are indicated in the corresponding sections, under the Notes to the Balance Sheet.

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34 Management of financial risks

34.1 Credit risks Credit risks from financial assets comprise the risk of default by a contractual party and therefore do not exceed the positive fair values in respect of the contractual party in question. The risk from originated financial instruments is covered by value adjustments for loss of receivables. The contractual partners for cash and capital investments, as well as currency and raw materials hedging instruments, have impeccable credit standings. Over and above this, the risks are restricted by a limit system that is based on the credit ratings of international rating agencies and the equity base of the contractual parties.

The credit quality of financial assets valued at acquisition cost is shown in the following table:

Gross Gross carrying Neither carrying Neither amount as past due Past due amount as past due Past due of Dec. 31, nor and not of Dec. 31, nor and not EUR million 2008 impaired impaired Impaired 2007 impaired impaired Impaired Measured at amortized cost Trade receivables 2,247 1,490 687 70 2,163 1,353 787 23 Other receivables 5,793 5,727 50 16 1,525 1,448 66 11 Loans 4,344 4,343 0 1 312 311 0 1 Other 1,449 1,384 50 15 1,213 1,137 66 10 Total 8,040 7,217 737 86 3,688 2,801 853 34

The Audi Group’s trading partners, borrowers and debtors are regularly monitored under the risk management system. All receivables that are “neither past due nor impaired,” amounting to EUR 7,217 (2,801) million, are allocable to risk category 1. Risk category 1 is the highest rating category within the Volkswagen Group; it exclusively includes “claims against contractual partners of high creditworthiness.”

Within the Audi Group, there are absolutely no past due financial instruments measured at fair value. The fair values of these financial instruments are determined based on their market prices. Due to the fluctuations in market value precipitated by the financial crisis, individual bad debt allowances for the cost of purchase of EUR 83 million were made in fiscal 2008 for securities measured at fair value.

Financial assets that are past due and not impaired are presented in the following analysis by maturity dates of gross carrying amounts:

Past due and EUR million not impaired Past due

Up to 30 to More than Dec. 31, 2008 30 days 90 days 90 days Measured at amortized cost Trade receivables 687 493 134 60 Other receivables 50 40 7 3 Loans 0 0 – – Other 50 40 7 3 Total 737 533 141 63

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Past due and Consolidated Financial EUR million not impaired Past due Statements 170 Income Statement Up to 30 to More than 171 Balance Sheet Dec. 31, 2007 30 days 90 days 90 days 172 Cash Flow Statement Measured at amortized cost 173 Statement of Changes in Equity

Trade receivables 787 661 51 75 Notes to the Consolidated Other receivables 66 46 9 11 Financial Statements Loans 0 0 – – 174 Development of fixed assets 2008 Other 66 46 9 11 176 Development of Total 853 707 60 86 fixed assets 2007 178 General information 183 Recognition and The credit risk is low overall, as the vast majority of the past due and not impaired financial measurement principles 189 Notes to the Income assets are past due by only a short period – predominantly due to the customer’s purchase in- Statement voice and payment processes. It was therefore not necessary to implement any contractual 196 Notes to the Balance Sheet 209 Additional disclosures changes to prevent financial instruments from becoming past due. 227 Events occurring subsequent In fiscal 2008, the Audi Group did not accept any collateral with the intention of selling it. to the balance sheet date 228 Statement of Interests held by the Audi Group Value adjustments Developments of value adjustments of claims that existed on the balance sheet date and that were measured at cost can be broken down as follows for the 2008 and 2007 fiscal years:

Specific value Specific value EUR million 2008 adjustment 2007 adjustment Position as of January 1 19 19 19 19 Addition 26 26 9 9

Utilization – 8 – 8 – 2 – 2

Dissolution – – – 7 – 7 Position as of December 31 37 37 19 19

Portfolio-based write-downs are not used within the Audi Group.

Collateral The Audi Group recorded financial assets as collateral for liabilities in the amount of EUR 82 (53) million.

34.2 Liquidity risks A liquidity forecast based on a fixed planning horizon and available yet unused lines of credit assure adequate liquidity at all times.

Analysis by maturity date of undiscounted cash used for financial liabilities The financial assets reported as of the balance sheet date are categorized separately by maturity date in the following table:

EUR million Total

Dec. 31, 2008 Up to 1 year 1 to 5 years Over 5 years Financial liabilities 676 673 2 1 Trade payables 3,302 3,302 – – Other financial liabilities 1,602 1,575 27 – Derivatives used as hedges 12,685 5,243 7,442 – Total 18,265 10,793 7,471 1

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The cash used for derivatives where gross settlement has been agreed is offset by cash received. These cash receipts are not presented in the analysis by maturity date. Had the cash receipts also been taken into account, the cash used would have been significantly lower in the analysis by maturity date.

34.3 Market risks Given the global nature of its operations, the Audi Group is exposed to various market risks, which are described below. The individual risk types and the respective risk management measures are also described. Additionally, these risks are quantified by means of sensitivity analyses.

Currency risks The Audi Group is exposed to exchange rate fluctuations in view of its international business activities. The measures implemented to hedge against these currency risks are coordinated regularly between AUDI AG and the Group Treasury of Volkswagen AG (Wolfsburg) in accordance with Volkswagen’s organizational guideline. These risks are limited by concluding appropriate hedges for matching amounts and maturities. The hedging transactions are performed centrally for the Audi Group by Volkswagen AG on the basis of an agency agreement. The results from hedging contracts are credited or debited to the Audi Group each month on the basis of the proportionate share of the Volkswagen Group’s overall hedging volume. In accordance with the Volkswagen organizational guideline, AUDI AG additionally concludes hedging transactions of its own to a limited extent, where this helps to simplify current operations. Marketable derivative financial instruments (foreign exchange contracts, currency option transactions and currency swaps) are used for this purpose. Contracts are concluded exclusively with first-rate national and international banks whose creditworthiness is regularly examined by leading rating agencies. For the purpose of managing currency risks, exchange rate hedging in the 2008 fiscal year focused on the U.S. dollar, the pound sterling, the Japanese yen, the Swedish krona, the Russian ruble and the Swiss franc. Currency risks pursuant to IFRS 7 arise as a result of financial instruments that are denominated in a currency other than the functional currency and are of a monetary nature. Exchange rate variances from the translation of financial statements into the Group currency (translation risk) are disregarded. Within the Audi Group, the principal originated monetary financial instruments (liquid assets, receivables, securities held and equity instruments held, interest-bearing liabilities, liabilities under finance lease arrangements, interest-free liabilities) are either denominated directly in the functional currency or substantially transferred to the functional currency through the use of derivatives. Above all, the generally short maturity of the instruments also means that potential exchange rate movements have only a very minor impact on profit or equity. Currency risks are measured using sensitivity analyses, during which the impact on profit and equity of hypothetical changes to relevant risk variables is assessed. All non-functional currencies in which the Audi Group enters into financial instruments are fundamentally treated as relevant risk variables. The periodic effects are determined by applying the hypothetical changes in the risk variables to the inventory of financial instruments on the reporting date. It is assumed for this purpose that the inventory on the reporting date is representative of the entire year. Movements in the exchange rate against the underlying currencies for the hedged transactions affect the hedging reserve in equity and the fair value of these hedging transactions.

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Fund price risks Consolidated Financial The special mutual funds created using surplus liquidity are exposed, in particular, to an equity Statements 170 Income Statement and bond price risk that may arise from fluctuating stock market prices and indices, and market 171 Balance Sheet interest rates. The changes in bond prices resulting from a variation in market interest rates are 172 Cash Flow Statement 173 Statement of Changes in Equity quantified separately in the corresponding notes on “Currency risks” and on “Interest rate risks,” reflecting the evaluation of foreign exchange and other interest rate risks from the special mu- Notes to the Consolidated Financial Statements tual funds. 174 Development of Risks from special mutual funds are generally countered by maintaining a broad mix of prod- fixed assets 2008 ucts, issuers and regional markets when investing funds, as stipulated in the investment guide- 176 Development of fixed assets 2007 lines. Where necessitated by the market situation, currency hedges in the form of futures con- 178 General information tracts are also used. Such measures are coordinated by AUDI AG in agreement with the Group 183 Recognition and measurement principles Treasury of Volkswagen AG (Wolfsburg) and implemented at operational level by the special 189 Notes to the Income mutual funds’ risk management teams. Statement 196 Notes to the Balance Sheet Fund price risks are measured within the Audi Group in accordance with IFRS 7 using sensitivity 209 Additional disclosures analyses. The impact of hypothetical changes to risk variables on financial instrument prices is 227 Events occurring subsequent to the balance sheet date calculated. Market prices and indices are particularly relevant risk variables in the case of fund 228 Statement of Interests price risks. held by the Audi Group

Commodity price risks Commodity price risks are avoided or limited by entering into commodity futures transactions. The hedging measures are coordinated regularly between AUDI AG and Volkswagen AG (Wolfsburg), in accordance with the existing Volkswagen organizational guideline. The hedging transactions are performed centrally for AUDI AG by Volkswagen AG on the basis of an agency agreement. The results from hedging contracts are credited or debited to the Audi Group on the basis of the proportionate share of the Volkswagen Group’s overall hedging volume. Hedging measures relate principally to the supply of the following raw materials: aluminum, lead and copper. Contracts are concluded exclusively with first-rate national and international banks whose creditworthiness is regularly examined by leading rating agencies. Commodity price risks are also calculated using sensitivity analyses. Hypothetical changes to the listed prices of the above commodities are studied to calculate their impact on the cost structure and thus on profit before tax.

Interest rate risks Interest rate risks stem from changes in market rates, above all for medium- and long-term variable-rate receivables and liabilities. The Audi Group is exposed to interest rate risks primarily in the euro zone, Great Britain, the United States and Asia. To minimize the impact of fluctuating rates in these regions, use is also made of interest rate derivatives. The risks associated with changing interest rates are presented in accordance with IFRS 7 using sensitivity analyses. These involve presenting the effects of changes in market interest rates on interest payments, interest income and expenses, other components of the result and, where applicable, equity.

Quantifying currency risks by means of sensitivity analyses If the functional currencies had in each case increased or decreased in value by 10 percent compared with the other currencies, the following major effects on the hedging provision in equity and on profit before tax would have resulted. There is no virtue in adding up the individual figures, as the results for each functional currency are based on differing scenarios. Owing to the change to a more informative form of presentation, the figures for December 31, 2007 are not comparable with the aggregated individual figures of the prior year. Nevertheless, the figures for the prior year have also been determined in the new form of presentation and stated below in order to make a comparison possible.

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EUR million Dec. 31, 2008 Dec. 31, 2007

+ 10% – 10% + 10% – 10% Currency relation EUR / USD

Hedging provision 662 – 421 560 – 512

Profit before tax – 134 7 – 85 104 EUR / GBP

Hedging provision 288 – 288 170 – 166

Profit before tax – 7 17 – 2 1 EUR / JPY

Hedging provision 54 – 54 20 – 20

Profit before tax 2 – 2 – 2

Quantifying other market risks by means of sensitivity analyses Within the Audi Group, other market risks are also measured using sensitivity analyses in accordance with IFRS 7. The impact of hypothetical changes to risk variables on the corresponding Balance Sheet items is calculated. Depending on the type of risk, there are various possible risk variables (primarily equity prices, commodity prices, market interest rates). The sensitivity analyses carried out enabled the following other market risks to be quantified for the Audi Group:

Data in 2008 2007 Fund price risks

Change in share prices Percent + 10 – 10 + 10 – 10

Effects on equity capital EUR million + 1 – 1 + 6 – 6 Commodity price risks

Change in commodity prices Percent + 10 – 10 + 10 – 10

Effects on equity capital EUR million + 15 – 15 – –

Effects on results EUR million + 9 – 9 + 40 – 40 Interest rate change risks

Change in market interest rate Basis points + 100 – 100 + 100 – 100

Effects on equity capital EUR million – 15 + 17 – 20 + 22

Effects on results EUR million – 3 + 3 + 4 – 4

34.4 Methods of monitoring the effectiveness of hedging relationships Within the Audi Group, the effectiveness of hedging relationships is evaluated prospectively using the critical terms match method, as well as by means of statistical methods in the form of a regression analysis. Retrospective evaluation of the effectiveness of hedges involves an effectiveness test in the form of the dollar offset method or in the form of a regression analysis. In the case of the dollar offset method, the changes in value of the underlying transaction, expressed in monetary units, are compared with the changes in value of the hedge expressed in monetary units. All hedge relationships were effective within the range specified in IAS 39 (80 to 125 percent). In the case of the regression analysis, the performance of the underlying transaction is viewed as an independent variable whilst that of the hedging transaction is regarded as a dependent variable. Classification as an effective hedging relationship is made with a coefficient of determination of R2 > 0.96 and of R2 > 0.80 for aluminum transactions. In both cases, the slope fac-

tor b must lie between – 0.80 and – 1.25. All of the hedging relationships verified using this statistical method proved to be effective on the year-end date.

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Nominal volume of derivative financial instruments Consolidated Financial The nominal volumes of the hedges presented represent the total of all buying and selling Statements 170 Income Statement prices on which the transactions are based. 171 Balance Sheet 172 Cash Flow Statement 173 Statement of Changes in Equity EUR million Nominal volumes Fair values

Notes to the Consolidated Residual time Residual time Financial Statements Dec. 31, to maturity Dec. 31, to maturity Dec. 31, Dec. 31, 2008 up to 1 year 2007 up to 1 year 2008 2007 174 Development of fixed assets 2008 Cash flow hedges 12,805 5,266 9,222 4,464 810 800 176 Development of Foreign exchange fixed assets 2007 contracts 7,588 5,185 6,807 4,463 570 625 178 General information 183 Recognition and Currency option measurement principles transactions 4,980 – 2,414 – 309 175 189 Notes to the Income Currency swaps – – 1 1 – – Statement 196 Notes to the Balance Sheet Commodity futures 237 81 – – – 69 – 209 Additional disclosures Non-hedge derivatives 147 88 451 177 82 50 227 Events occurring subsequent Total portfolio 12,952 5,354 9,673 4,641 892 850 to the balance sheet date 228 Statement of Interests held by the Audi Group The derivative financial instruments used exhibit a maximum hedging term of five years.

35 Cash Flow Statement The Cash Flow Statement details the payment streams for both the 2008 fiscal year and the previous year, categorized according to cash used and received for operating, investing and financing activities. The effects of changes in the group of consolidated companies and to foreign exchange rates on cash flows are presented separately. Cash flow from operating activities includes all payment streams in connection with ordinary activities and is presented using the indirect calculation method. Starting from the profit before profit transfer and tax, all income and expenses with no impact on cash flow (mainly write- downs) are excluded. In 2008, cash flow from operating activities included payments for interest received amounting to EUR 400 (278) million and for interest paid amounting to EUR 95 (91) million. The Audi Group received dividends and profit transfers totaling EUR 71 (84) million in 2008. The income tax payments item substantially comprises payments made to Volkswagen AG (Wolfsburg) on the basis of the single-entity relationship for tax purposes in Germany, as well as payments to foreign tax authorities. Cash flow from investing activities includes capitalized development costs as well as additions to other intangible assets, property, plant and equipment, long-term investments and non- current loans advanced. The change in investment property, the proceeds from the disposal of assets, the proceeds from the sale of investments and the change in securities effective as payment are similarly reported in cash flow from investing activities. The sale of AUDI DO BRASIL E CIA. (Curitiba, Brazil) produced an inflow of EUR 101 million. Furthermore, changes from fixed deposits with a residual maturity of more than three months and credit extended were transferred to cash flow from investing activities. The comparative figures for the previous year have been adjusted accordingly, resulting in a reduction of EUR 75 million in cash flow from investing activities, whilst cash flow from financing activities rose by EUR 75 million. Cash flow from financing activities includes cash used for the transfer of profit, as well as changes in financial liabilities. The changes in the Balance Sheet items that are presented in the Cash Flow Statement cannot be derived directly from the Balance Sheet because the effects of currency translation and of changes in the group of consolidated companies do not affect cash and are segregated. The change in cash and cash equivalents due to changes in the group of consolidated companies relates to companies that have been consolidated for the first time.

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36 Contingencies Contingencies are unrecognized contingent liabilities whose amount corresponds to the maximum possible use as of the balance sheet date.

EUR million Dec. 31, 2008 Dec. 31, 2007 Liabilities from guarantees 62 9 Furnishing of collateral for outside liabilities 68 53 Total 130 62

37 Litigation Neither AUDI AG nor any of its Group companies are involved in ongoing or prospective legal or arbitration proceedings which could have a significant influence on their economic position. Appropriate provisions have been created within each Group company, or adequate insurance benefits are anticipated, for potential financial charges resulting from other legal or arbitra- tional proceedings.

38 Change of control agreements Change of control clauses are contractual agreements between a company and third parties to provide for legal succession should there be a direct or indirect change in the ownership structure of any party to the contract. The contractual agreements between the Audi Group and third parties do not contain any change of control clauses in the event of a change in the ownership structure of AUDI AG or its subsidiaries.

39 Other financial obligations

EUR million Due Dec. 31, 2008 Due Dec. 31, 2007

Within 1 1 to 5 Over Over year years 5 years Total 1 year Total Ordering commitments for property, plant and equipment 761 406 – 1,167 332 1,203 intangible assets 181 41 – 222 47 220 Commitments from long-term rental and lease agreements 57 39 16 112 18 39 Total 999 486 16 1,501 397 1,462

40 Discontinued operations There are no plans to discontinue or cease operations as defined by IFRS 5.

41 Cost of materials

EUR million 2008 2007 Raw materials and consumables used, as well as purchased goods 21,804 21,242 Purchased services 1,626 1,850 Total 23,430 23,092

42 Personnel costs

EUR million 2008 2007 Wages and salaries 3,076 2,836 Social insurance and expenses for retirement benefits and support payments 633 570 of which relating to retirement benefit plans 65 84 of which defined contribution pension plans 258 237 Total 3,709 3,406

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43 Total average number of employees for the year Consolidated Financial Statements 170 Income Statement 2008 2007 171 Balance Sheet Domestic Group companies 47,063 45,372 172 Cash Flow Statement Foreign Group companies 10,470 7,975 173 Statement of Changes in Equity

Total 57,533 53,347 Notes to the Consolidated of which apprentices 2,057 2,002 Financial Statements

174 Development of fixed assets 2008 44 Related party disclosures 176 Development of fixed assets 2007 Related parties as defined in IAS 24 are: 178 General information – the parent company, Volkswagen AG (Wolfsburg), and its subsidiaries outside the Audi Group 183 Recognition and measurement principles – Porsche Automobil Holding SE (Stuttgart), and its affiliated companies (the company’s voting 189 Notes to the Income interest in Volkswagen AG was 42.6 percent on October 24, 2008. It appoints two members Statement 196 Notes to the Balance Sheet of the Supervisory Board of Volkswagen AG), 209 Additional disclosures – other parties (individuals and companies) that could be affected by the reporting entity or 227 Events occurring subsequent to the balance sheet date that could influence the reporting entity, such as 228 Statement of Interests – the members of the Board of Management and Supervisory Board of AUDI AG, held by the Audi Group – the members of the Board of Management and Supervisory Board of Volkswagen AG, – associated companies, – non-consolidated subsidiaries.

The volume of transactions with the parent company, Volkswagen AG, and with other subsidiaries that do not belong to the Audi Group is presented in the following overview:

EUR million 2008 2007 Sales and services supplied to Volkswagen AG 5,037 4,443 Volkswagen AG subsidiaries not belonging to the Audi Group 8,275 8,870 Purchases and services received from Volkswagen AG 5,252 4,955 Volkswagen AG subsidiaries not belonging to the Audi Group 3,093 3,821 Receivables from Volkswagen AG 7,632 5,885 Volkswagen AG subsidiaries not belonging to the Audi Group 3,253 2,820 Liabilities to Volkswagen AG 2,776 2,722 Volkswagen AG subsidiaries not belonging to the Audi Group 1,155 1,166 Contingent liabilities to Volkswagen AG – – Volkswagen AG subsidiaries not belonging to the Audi Group 118 86

As of December 31, 2008, sales of receivables to Volkswagen AG subsidiaries not belonging to the Audi Group amounted to EUR 1,569 (1,590) million. The possibility of a claim arising from contingencies is not regarded as likely.

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The extent of business relations between fully consolidated companies of the Audi Group and non-consolidated companies, associated companies and other related parties is presented in the following tables:

EUR million 2008 2007 2008 2007

Goods and services supplied Goods and services received Associated companies 1,569 1,453 1 1 Non-consolidated subsidiaries 379 238 106 14 Porsche companies 982 833 15 13

EUR million Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007

Receivables from Liabilities to Associated companies 232 149 6 31 Non-consolidated subsidiaries 117 26 42 10 Porsche companies 6 11 2 1

All business transactions with related parties have been conducted on the basis of internationally comparable uncontrolled price methods pursuant to IAS 24, according to the terms that customarily apply to outside third parties. The goods and services procured from related parties primarily include supplies for production, as well as development, transportation, financial and distribution services and, to a lesser extent, design, training and other services and supplies of genuine parts. Business transacted for related parties mainly comprises sales of new and used cars, engines and components, and allocation of cash and cash equivalents in the form of loans, fixed deposits and overnight deposits. Members of the Boards of Management or Supervisory Boards of Volkswagen AG and AUDI AG also belong to the supervisory or management boards of other companies with which the Audi Group maintains business relations. All transactions with such companies are similarly conducted according to the terms that customarily apply to outside third parties. A full list of the supervisory board mandates of members of the Board of Management and Supervisory Board of AUDI AG is presented in the Financial Statements of AUDI AG. In the same manner, the service relationships with the members of the Boards of Management and Supervisory Boards of Volkswagen AG and AUDI AG were conducted at arm’s length. As in the previous year, the volume of transactions was low. Services having a total value of EUR 615 thousand were purchased from this group of persons during the year under review, and services with a total value of EUR 106 thousand were provided by the Audi Group. For details of the remuneration paid to the members of the Board of Management and Supervisory Board of AUDI AG, please refer to Note 48, “Details relating to the Supervisory Board and Board of Man- agement.” AUDI AG and its Group companies primarily deposit their cash funds with the Volkswagen Group or take up cash funds from the Volkswagen Group. All transactions are processed under market conditions.

45 Auditor’s fees

EUR thousand 2008 2007 Auditing of the financial statements 707 438 Other certification or valuation services 113 90 Tax consultancy services 164 8 Other services 155 246 Total 1,139 782

Based on the requirements of commercial law, the auditor’s fees include auditing of the Con- solidated Financial Statements and auditing of the annual financial statements of the domestic subsidiaries.

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46 Segment reporting Consolidated Financial The Audi Group primarily comprises only the “Cars” segment. Statements 170 Income Statement The secondary segment reporting structure is based on the Group’s internal steering and report- 171 Balance Sheet ing arrangements. The Audi Group is structured into the segments of Germany, Rest of Europe 172 Cash Flow Statement 173 Statement of Changes in Equity and Rest of World on the basis of the regional locations of its assets. Inter-segment transactions are fundamentally conducted at arm’s length, as is also customary Notes to the Consolidated Financial Statements for transactions with outside third parties. 174 Development of fixed assets 2008 EUR million External revenue Internal revenue Total revenue 176 Development of fixed assets 2007 2008 2007 2008 2007 2008 2007 178 General information 183 Recognition and Germany 21,217 20,847 6,137 5,867 27,354 26,714 measurement principles Rest of Europe 8,380 8,179 3,986 3,492 12,366 11,671 189 Notes to the Income Statement Rest of World 4,599 4,591 1 4 4,600 4,595 196 Notes to the Balance Sheet Consolidation 209 Additional disclosures measures – – – 10,124 – 9,363 – 10,124 – 9,363 227 Events occurring subsequent Audi Group 34,196 33,617 – – 34,196 33,617 to the balance sheet date 228 Statement of Interests held by the Audi Group EUR million Profit before tax Segment assets Segment liabilities

Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2008 2007 2008 2007 2008 2007 Germany 2,432 2,371 19,071 17,580 13,318 12,272 Rest of Europe 661 465 6,804 5,568 2,527 1,387 Rest of World 132 87 1,964 1,515 1,963 1,664 Consolidation measures – 48 – 8 – 2,473 – 2,745 – 2,171 – 1,140 Audi Group 3,177 2,915 25,366 21,918 15,637 14,183

Investments in intangible assets EUR million and property, plant and equipment Long-term investments

2008 2007 2008 2007 Germany 1,990 1,831 57 34 Rest of Europe 440 235 1 – Rest of World 23 13 1 2

Consolidation measures – – – 26 – Audi Group 2,453 2,079 33 36

EUR million Depreciation and amortization Other non-cash expenses

2008 2007 2008 2007 Germany 1,507 1,689 786 961 Rest of Europe 394 591 328 214 Rest of World 7 7 316 273 Consolidation measures – – 24 738 Audi Group 1,908 2,287 1,454 2,186

Sales revenues by region 2008 2007

EUR million % EUR million % Germany 9,503 27.8% 8,994 26.8% Rest of Europe 16,651 48.7% 17,017 50.6% Asia-Pacific 4,250 12.4% 3,641 10.8% North America 3,321 9.7% 3,479 10.3% Africa 234 0.7% 289 0.9% South America 237 0.7% 197 0.6% Total 34,196 100.0% 33,617 100.0%

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47 German Corporate Governance Code The Board of Management and Supervisory Board of AUDI AG submitted the declaration pursuant to Section 161 of the German Stock Corporation Act relating to the German Corporate Gov- ernance Code on November 24, 2008, and made it permanently accessible on the Internet at www.audi.com/cgk-declaration.

48 Details relating to the Supervisory Board and Board of Management The remuneration paid to members of the Board of Management complies with the legal requirements of the German Stock Corporation Act as well as the recommendations and most of the suggestions of the German Corporate Governance Code. The total short-term remuneration comprises fixed and variable components. The fixed components assure a base remuneration that enables the member of the Board of Management to execute his duties conscientiously and in the best interests of the company, without becoming dependent upon the attainment of short-term targets. Conversely, variable components that are contingent on the economic position of the Company reconcile the interests of the Board of Management with those of the other stakeholders. The remuneration paid to members of the Board of Management for the 2008 fiscal year amounted to EUR 6,893 (4,614) thousand, of which variable components accounted for EUR 4,135 (2,309) thousand. Fixed components paid to the members of the Board of Manage- ment in the 2008 fiscal year totaled EUR 2,758 (2,305) thousand. Disclosure of the remuneration paid to each individual member of the Board of Management, by name, pursuant to Section 314, Para. 1, No. 6a), Sentences 5 to 9 of the German Commercial Code has not been effected, as the 2006 Annual General Meeting adopted a corresponding resolution that is valid for a period of five years. In addition to fixed payments in cash, there are varying levels of contributions in kind, including, in particular, the use of company cars. Each member of the Board of Management is paid a variable annual bonus. The variable bonus comprises annually recurring components that are linked to the Company’s economic success. It is largely based on the earnings achieved by the Company and its economic position. There are no non-recurring variable components linked to business success in the remuneration paid to members of the Board of Management. Stock options serve as variable remuneration components providing a long-term incentive. These options are based on the performance of Volkswagen ordinary shares. Since the stock option plan of Volkswagen AG (Wolfsburg) was not extended beyond 2006, no further convertible bonds were issued in the 2008 fiscal year. The stock option plan is basically designed as follows: The basis for determining the conversion price (base conversion price) of a tranche consists of the average XETRA closing prices of Volks- wagen ordinary shares on the five trading days preceding each decision to issue convertible bonds. Conversion may be effected for the first time following a qualifying period of 24 months and thereafter up until a period of five years has elapsed from the time the convertible bonds were issued. The conversion price is initially 110 percent of the base conversion price, rising by five percentage points in each subsequent year. Members of the Board of Management may exercise their conversion rights only three times a year, during four-week exercise periods, each of which commences on a public reporting date of Volkswagen AG. In the spirit of the German Corporate Governance Code, the stock option plan is thus based on demanding, relevant comparison parameters. Further details are presented in the Agenda to the Annual General Meeting of Volkswagen AG on April 16, 2002, which authorized the introduction of the stock option plan. The purpose of the stock option plan’s structure is to grant the members of the Board of Man- agement a remuneration component that is based on appreciation of Volkswagen common shares. It is thus intended to contribute toward increasing value creation and toward enhancing the value of Volkswagen AG. Moreover, stock option plans are a widely used instrument for recruiting and retaining board members. The possibility of retrospectively adjusting the stock option plan’s performance targets or comparative parameters is excluded.

225

In the 2008 fiscal year, 950 stock options were exercised by members of the Board of Manage- Consolidated Financial ment of AUDI AG. On December 31, the members of the Board of Management no longer held Statements 170 Income Statement any convertible bonds. 171 Balance Sheet Under certain circumstances, members of the Board of Management are entitled to retirement 172 Cash Flow Statement 173 Statement of Changes in Equity benefits and a disability pension. The amount of EUR 1,374 (2,064) thousand was allocated to the provisions for pensions for current members of the Board of Management during the 2008 Notes to the Consolidated Financial Statements fiscal year; the provisions for pensions on December 31, 2008 totaled EUR 7,624 (7,116) thou- 174 Development of sand. fixed assets 2008 Former members of the Board of Management and their surviving dependants received pay- 176 Development of fixed assets 2007 ments totaling EUR 3,353 (1,957) thousand. These included payments resulting from termina- 178 General information tion of office of EUR 1,342 (0) thousand. The provisions for pensions for this group of individ- 183 Recognition and measurement principles uals amount to EUR 21,761 (21,083) thousand. 189 Notes to the Income The members of the Board of Management, together with their seats on other supervisory Statement 196 Notes to the Balance Sheet boards and regulatory bodies – pursuant to Section 285, Sentence 1, No. 10 of the German 209 Additional disclosures Commercial Code and Section 125, Para. 1, Sentence 3 of the German Stock Corporation Act – 227 Events occurring subsequent to the balance sheet date are indicated in the Notes to the Financial Statements of AUDI AG. 228 Statement of Interests The basic features of the remuneration paid to members of the Supervisory Board are stipulated held by the Audi Group in Section 16 of the Articles of Incorporation and Bylaws. The total short-term remuneration comprises fixed and variable components. The level of the variable remuneration components is based on the compensatory payment made for the 2008 fiscal year in accordance with the applicable provision in the Articles of Incorporation and Bylaws. The remuneration paid to members of the Supervisory Board of AUDI AG totaled EUR 600 (558) thousand, including EUR 193 (175) thousand in fixed remuneration components and EUR 407 (383) thousand in variable remuneration components.

226

Supervisory Board 1)

Position as of Dec. 31, 2008 Prof. Dr. rer. nat. Martin Winterkorn Chairman 2) Stockholder representative Berthold Huber Deputy Chairman 2) 6) Employee representative Dr. rer. pol. h.c. Bruno Adelt Stockholder representative Senator h.c. Helmut Aurenz Stockholder representative Heinz Eyer Employee representative 6) Wolfgang Förster Employee representative 5) 6) Dr. rer. pol. h.c. Francisco Javier Garcia Sanz Stockholder representative Holger P. Härter Stockholder representative 3) Johann Horn Employee representative 6) Peter Mosch Employee representative 2) 6) Wolfgang Müller Employee representative 6) Dr. rer. pol. Horst Neumann Stockholder representative Dr.-Ing. Franz-Josef Paefgen Stockholder representative Hon.-Prof. Dr. techn. h.c. Dipl.-Ing. ETH Ferdinand K. Piëch Stockholder representative Hans Dieter Pötsch Stockholder representative 5) Norbert Rank Employee representative 4) 6) Jörg Schlagbauer Employee representative 6) Max Wäcker Employee representative 6) Hubert Waltl Employee representative Dr.-Ing. Wendelin Wiedeking Stockholder representative 2) Dr. rer. pol. Carl H. Hahn Honorary Chairman

1) The profession and company of the members of the Supervisory Board, together with other non-executive directorships, are presented in the Notes to the Financial Statements of AUDI AG. 2) Member of the Presiding Committee and the Negotiating Committee 3) Chairman of the Audit Committee 4) Deputy Chairman of the Audit Committee 5) Member of the Audit Committee 6) The employees’ elected representatives have stated that their remuneration as Supervisory Board members shall be paid to the Hans Böckler Foundation, in accordance with the guidelines of the German Confederation of Trade Unions.

227

EVENTS OCCURRING SUBSEQUENT TO THE BALANCE SHEET DATE Consolidated Financial Statements 170 Income Statement Porsche Automobil Holding SE (Stuttgart) and its stockholders whose voting rights are allocable 171 Balance Sheet to Volkswagen AG (Wolfsburg), pursuant to Section 22, Para. 1, Sentence 1, No. 1 of German 172 Cash Flow Statement 173 Statement of Changes in Equity Securities Trading Law (WpHG), declared in accordance with Section 21, Para. 1 of German Secu- rities Trading Law that their share of voting rights in Volkswagen AG exceeded the threshold of Notes to the Consolidated Financial Statements 50 percent on January 5, 2009 and amounted on this day to 50.76 percent. 174 Development of fixed assets 2008 176 Development of fixed assets 2007 178 General information 183 Recognition and measurement principles 189 Notes to the Income Statement 196 Notes to the Balance Sheet 209 Additional disclosures 227 Events occurring subsequent to the balance sheet date 228 Statement of Interests held by the Audi Group

228

Statement of Interests held by the Audi Group

for the fiscal year ended December 31, 2008 PRINCIPAL GROUP COMPANIES

Name and registered office Capital share in % Fully consolidated companies AUDI AG, Ingolstadt Audi Retail GmbH, Ingolstadt 100.0 Audi Zentrum Berlin-Charlottenburg GmbH & Co. KG, Berlin 100.0 Audi Zentrum Hamburg GmbH, Hamburg 100.0 Audi Zentrum Hannover GmbH, Hanover 100.0 Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt 100.0 quattro GmbH, Neckarsulm 100.0 Audi Australia Pty Ltd., Botany (Australia) 100.0 Audi Brasil Distribuidora de Veículos Ltda., São Paulo (Brazil) 100.0 AUDI HUNGARIA MOTOR Kft., Győr (Hungary) 100.0 Audi Japan K.K., Tokyo (Japan) 100.0 Audi Volkswagen Korea Ltd., Seoul (South Korea) 100.0 Audi Volkswagen Middle East FZE, Dubai (United Arab Emirates) 100.0 Automobili Lamborghini Holding S.p.A., SantÁgata Bolognese (Italy) 100.0 Automobili Lamborghini S.p.A., SantÁgata Bolognese (Italy) 100.0 Lamborghini ArtiMarca S.p.A., SantÁgata Bolognese (Italy) 100.0 MML S.p.A., SantÁgata Bolognese (Italy) 100.0 VOLKSWAGEN GROUP ITALIA S.P.A., Verona (Italy) 100.0 VOLKSWAGEN GROUP FIRENZE S.P.A., Florence (Italy) 100.0 AUDI BRUSSELS S.A./N.V., Brussels (Belgium)* – Audi Canada Inc., Ajax (Canada)* – Audi of America, LLC, Herndon, Virginia (USA)* –

Companies accounted for using the equity method FAW-Volkswagen Automotive Company Ltd., Changchun (China) 10.0

* AUDI AG exercises control pursuant to IAS 27.13, Sentence 2 (c).

229

Responsibility Statement

“Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the Consolidated Financial Statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.”

Ingolstadt, February 11, 2009

The Board of Management

Rupert Stadler

Ulf Berkenhagen Michael Dick Frank Dreves

Peter Schwarzenbauer Axel Strotbek Dr. Werner Widuckel

230

Auditor’s Report

This report was originally prepared in the German language. In case of ambiguities the German version shall prevail:

“Auditor’s Report We have audited the consolidated financial statements prepared by AUDI AG, Ingolstadt, comprising the balance sheet, the income statement, statement of recognized income and expense, cash flow statement and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31, 2008. The preparation of the consolidated financial statements and the group management report in accordance with the IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to § (Article) 315a Abs. (paragraph) 1 HGB (“Handelsgesetzbuch”: German Commercial Code) are the responsibility of the parent Company’s Board of Managing Directors. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.

We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assess- ing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Company´s Board of Managing Directors, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion based on the findings of our audit the consolidated financial statements comply with the IFRS as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB, and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development.”

Munich, February 11, 2009

PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Franz Wagner Petra Justenhoven Wirtschaftsprüfer Wirtschaftsprüferin

231

Declaration of the AUDI AG Board of Management on the 2008 Consolidated Financial Statements

The Board of Management of AUDI AG is responsible for the preparation of the Consolidated Financial Statements and Group Management Report. Reporting is performed on the basis of the International Financial Reporting Standards (IFRS) as applicable within the European Union, and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The Group Management Report is prepared in accordance with the requirements of the German Commercial Code. Under Section 315a of the German Commercial Code, AUDI AG is obliged to prepare its Consolidated Financial Statements in accordance with the requirements of the International Accounting Standards Board (IASB). The regularity of the Consolidated Financial Statements and Group Management Report is assured by means of internal controlling systems, the implementation of uniform guidelines throughout the Group, and employee training and advancement measures. Compliance with the legal requirements and with internal Group guidelines, as well as the reliability and functioning of the systems of controlling, are checked on an ongoing basis throughout the Group. The early warning function required by law is achieved by means of a Group-wide risk management system that enables the Board of Management to identify potential risks at an early stage and initiate corrective action as necessary. PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Munich, has examined the Consolidated Financial Statements and Group Management Report in its capacity as independent auditor, in accordance with the resolution of the Annual General Meeting, and issued its unqualified certification as shown on the page opposite. The Consolidated Financial Statements, the Group Management Report, the Audit Report and the measures to be taken by the Board of Management for the prompt identification of risks which could pose a threat to the Company’s survival were discussed at length by the Supervisory Board in the presence of the auditors. The findings of this examination are indicated in the Re- port of the Supervisory Board.

232

Fuel consumption and emission figures

As at: February 2009 (all data apply to features of the German market)

Power output Fuel consumption CO2 emissions Model (kW) Transmission Fuel (l/100 km) (g/km) urban extra urban combined combined Audi A3 A3 1.4 TFSI 92 6-speed Premium 8.0 4.8 6.0 139 A3 1.4 TFSI 92 S tronic, 7-speed Premium 7.4 4.7 5.7 133 A3 1.6 75 5-speed Premium 9.5 5.3 6.8 162 A3 1.6 75 S tronic, 7-speed Premium 9.4 5.1 6.7 159 A3 1.8 TFSI 118 6-speed Premium 9.1 5.3 6.7 155 A3 1.8 TFSI 118 S tronic, 7-speed Premium 8.9 5.3 6.6 153 A3 1.8 TFSI quattro 118 6-speed Premium 10.0 6.1 7.5 174 A3 2.0 TFSI 147 6-speed Premium 9.8 5.5 7.1 164 A3 2.0 TFSI 147 S tronic, 6-speed Premium 9.8 5.7 7.2 166 A3 2.0 TFSI quattro 147 S tronic, 6-speed Premium 9.9 6.1 7.5 174 A3 3.2 quattro 184 S tronic, 6-speed Super Plus 13.0 7.3 9.4 224 A3 1.9 TDI e 77 5-speed Diesel 5.8 3.8 4.5 119 A3 1.9 TDI 77 5-speed Diesel 6.0 3.9 4.7 124 A3 1.9 TDI 77 S tronic, 6-speed Diesel 7.2 4.5 5.5 144 A3 2.0 TDI 103 6-speed Diesel 6.6 4.3 5.1 134 A3 2.0 TDI 103 S tronic, 6-speed Diesel 7.2 4.4 5.4 143 A3 2.0 TDI quattro 103 6-speed Diesel 7.3 4.6 5.6 146 A3 2.0 TDI 125 6-speed Diesel 6.9 4.2 5.2 139 A3 2.0 TDI 125 S tronic, 6-speed Diesel 7.2 4.6 5.6 147 A3 2.0 TDI quattro 125 6-speed Diesel 7.2 4.7 5.6 148 S3 2.0 TFSI quattro 195 6-speed Super Plus 11.8 6.6 8.5 198 S3 2.0 TFSI quattro 195 S tronic, 6-speed Super Plus 11.1 6.7 8.3 193 Audi A3 Sportback A3 Sportback 1.4 TFSI 92 6-speed Premium 8.2 4.9 6.1 143 A3 Sportback 1.4 TFSI 92 S tronic, 7-speed Premium 7.6 4.9 5.9 137 A3 Sportback 1.6 75 5-speed Premium 9.5 5.4 6.9 164 A3 Sportback 1.6 75 S tronic, 7-speed Premium 9.4 5.1 6.7 159 A3 Sportback 1.8 TFSI 118 6-speed Premium 9.1 5.4 6.7 157 A3 Sportback 1.8 TFSI 118 S tronic, 7-speed Premium 9.0 5.3 6.6 154 A3 Sportback 1.8 TFSI quattro 118 6-speed Premium 10.0 6.2 7.5 176 A3 Sportback 2.0 TFSI 147 6-speed Premium 9.9 5.6 7.2 167 A3 Sportback 2.0 TFSI 147 S tronic, 6-speed Premium 9.8 5.7 7.2 166 A3 Sportback 2.0 TFSI quattro 147 S tronic, 6-speed Premium 10.0 6.2 7.6 176 A3 Sportback 3.2 quattro 184 S tronic, 6-speed Super Plus 13.0 7.3 9.4 224 A3 Sportback 1.9 TDI e 77 5-speed Diesel 5.8 3.8 4.5 119 A3 Sportback 1.9 TDI 77 5-speed Diesel 6.1 4.0 4.8 127 A3 Sportback 1.9 TDI 77 S tronic, 6-speed Diesel 7.2 4.5 5.5 144 A3 Sportback 2.0 TDI 103 6-speed Diesel 6.6 4.3 5.1 134 A3 Sportback 2.0 TDI 103 S tronic, 6-speed Diesel 7.2 4.4 5.4 143 A3 Sportback 2.0 TDI quattro 103 6-speed Diesel 7.3 4.6 5.6 146 A3 Sportback 2.0 TDI 125 6-speed Diesel 6.9 4.2 5.2 139 A3 Sportback 2.0 TDI 125 S tronic, 6-speed Diesel 7.4 4.7 5.7 149 A3 Sportback 2.0 TDI quattro 125 6-speed Diesel 7.2 4.7 5.6 148 S3 Sportback 2.0 TFSI quattro 195 6-speed Super Plus 11.8 6.7 8.5 199 S3 Sportback 2.0 TFSI quattro 195 S tronic, 6-speed Super Plus 11.2 6.8 8.4 195 Audi A3 Cabriolet A3 Cabriolet 1.6 75 5-speed Premium 9.6 5.5 7.0 167 A3 Cabriolet 1.8 TFSI 118 6-speed Premium 9.0 5.6 6.8 159 A3 Cabriolet 1.8 TFSI 118 S tronic, 7-speed Premium 9.0 5.4 6.7 156 A3 Cabriolet 2.0 TFSI 147 6-speed Premium 10.0 5.6 7.2 169 A3 Cabriolet 2.0 TFSI 147 S tronic, 6-speed Premium 9.9 5.9 7.4 171 A3 Cabriolet 1.9 TDI 77 5-speed Diesel 6.4 4.3 5.1 134 A3 Cabriolet 2.0 TDI 103 6-speed Diesel 6.7 4.4 5.3 139 A3 Cabriolet 2.0 TDI 103 S tronic, 6-speed Diesel 7.7 4.4 5.6 148 Audi TT Coupé TT Coupé 1.8 TFSI 118 6-speed Premium 9.0 5.3 6.7 155 TT Coupé 2.0 TFSI 147 6-speed Super Plus 10.7 6.0 7.7 183 TT Coupé 2.0 TFSI 147 S tronic, 6-speed Super Plus 10.6 6.0 7.7 183 TT Coupé 2.0 TFSI quattro 147 S tronic, 6-speed Premium 10.5 6.1 7.7 178 TT Coupé 3.2 quattro 184 6-speed Super Plus 14.7 7.8 10.3 247 TT Coupé 3.2 quattro 184 S tronic, 6-speed Super Plus 12.9 7.3 9.4 224 TT Coupé 2.0 TDI quattro 125 6-speed Diesel 7.0 4.3 5.3 139 TTS Coupé 2.0 TFSI quattro 200 6-speed Super Plus 11.0 6.4 8.1 188 TTS Coupé 2.0 TFSI quattro 200 S tronic, 6-speed Super Plus 10.6 6.4 7.9 184 Audi TT Roadster TT Roadster 1.8 TFSI 118 6-speed Premium 9.1 5.6 6.9 159 TT Roadster 2.0 TFSI 147 6-speed Super Plus 10.7 6.2 7.8 186 TT Roadster 2.0 TFSI 147 S tronic, 6-speed Super Plus 10.8 6.1 7.8 186 TT Roadster 2.0 TFSI quattro 147 S tronic, 6-speed Premium 10.5 6.3 7.8 181 TT Roadster 3.2 quattro 184 6-speed Super Plus 14.8 7.8 10.4 250 TT Roadster 3.2 quattro 184 S tronic, 6-speed Super Plus 13.0 7.4 9.5 227 TT Roadster 2.0 TDI quattro 125 6-speed Diesel 7.2 4.5 5.5 144 TTS Roadster 2.0 TFSI quattro 200 6-speed Super Plus 11.1 6.7 8.3 193 TTS Roadster 2.0 TFSI quattro 200 S tronic, 6-speed Super Plus 10.7 6.5 8.0 187 Audi A4 Sedan A4 1.8 TFSI 88 6-speed Premium 9.5 5.6 7.1 164 A4 1.8 TFSI 88 multitronic, CVT Premium 9.4 5.9 7.2 169 A4 1.8 TFSI 118 6-speed Premium 9.5 5.6 7.1 164 A4 1.8 TFSI 118 multitronic, CVT Premium 9.4 5.9 7.2 169 A4 1.8 TFSI quattro 118 6-speed Premium 10.3 6.1 7.6 176 A4 2.0 TFSI 132 6-speed Premium 9.0 5.2 6.6 154 A4 2.0 TFSI 132 multitronic, CVT Premium 9.4 5.7 7.1 167 A4 2.0 TFSI 155 6-speed Premium 9.0 5.2 6.6 154 A4 2.0 TFSI 155 multitronic, CVT Premium 9.4 5.7 7.1 167 A4 2.0 TFSI quattro 155 6-speed Premium 10.0 5.9 7.4 172

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Power output Fuel consumption CO2 emissions Model (kW) Transmission Fuel (l/100 km) (g/km) urban extra urban combined combined A4 2.0 TFSI quattro 155 S tronic, 7-speed Premium 9.3 6.3 7.4 172 A4 3.2 FSI 195 multitronic, CVT Premium 11.2 6.4 8.2 194 A4 3.2 FSI quattro 195 6-speed Premium 13.0 6.6 8.9 213 A4 3.2 FSI quattro 195 tiptronic, 6-speed Premium 13.0 6.7 9.0 215 A4 2.0 TDI 88 6-speed Diesel 6.6 4.2 5.1 134 A4 2.0 TDI 105 6-speed Diesel 6.9 4.4 5.3 139 A4 2.0 TDI 105 multitronic, CVT Diesel 7.3 4.8 5.7 149 A4 2.0 TDI quattro 105 6-speed Diesel 7.6 4.9 5.9 155 A4 2.0 TDI 125 6-speed Diesel 7.1 4.2 5.3 139 A4 2.0 TDI quattro 125 6-speed Diesel 7.6 4.9 5.9 155 A4 2.7 TDI 140 6-speed Diesel 8.1 4.8 6.0 159 A4 2.7 TDI 140 multitronic, CVT Diesel 7.9 5.5 6.4 167 A4 3.0 TDI quattro 176 6-speed Diesel 8.8 5.3 6.6 173 A4 3.0 TDI quattro 176 tiptronic, 6-speed Diesel 8.8 5.9 6.9 182 S4 3.0 TFSI quattro 245 6-speed Premium 13.7 7.3 9.7 225 S4 3.0 TFSI quattro 245 S tronic, 7-speed Premium 13.5 7.0 9.4 219 Audi A4 Avant A4 Avant 1.8 TFSI 88 6-speed Premium 9.6 5.8 7.2 169 A4 Avant 1.8 TFSI 88 multitronic, CVT Premium 9.6 6.3 7.5 174 A4 Avant 1.8 TFSI 118 6-speed Premium 9.6 5.8 7.2 169 A4 Avant 1.8 TFSI 118 multitronic, CVT Premium 9.6 6.3 7.5 174 A4 Avant 1.8 TFSI quattro 118 6-speed Premium 10.3 6.2 7.7 179 A4 Avant 2.0 TFSI 132 6-speed Premium 9.1 5.4 6.8 159 A4 Avant 2.0 TFSI 132 multitronic, CVT Premium 9.8 5.9 7.3 172 A4 Avant 2.0 TFSI 155 6-speed Premium 9.1 5.4 6.8 159 A4 Avant 2.0 TFSI 155 multitronic, CVT Premium 9.8 5.9 7.3 172 A4 Avant 2.0 TFSI quattro 155 6-speed Premium 10.1 6.2 7.6 176 A4 Avant 2.0 TFSI quattro 155 S tronic, 7-speed Premium 9.4 6.5 7.6 175 A4 Avant 3.2 FSI 195 multitronic, CVT Premium 11.4 6.7 8.4 199 A4 Avant 3.2 FSI quattro 195 6-speed Premium 13.0 6.8 9.1 216 A4 Avant 3.2 FSI quattro 195 tiptronic, 6-speed Premium 13.1 6.9 9.2 219 A4 Avant 2.0 TDI 88 6-speed Diesel 6.8 4.4 5.3 140 A4 Avant 2.0 TDI 105 6-speed Diesel 6.9 4.5 5.4 143 A4 Avant 2.0 TDI 105 multitronic, CVT Diesel 7.5 5.2 5.9 155 A4 Avant 2.0 TDI quattro 105 6-speed Diesel 7.9 5.2 6.2 162 A4 Avant 2.0 TDI 125 6-speed Diesel 7.2 4.7 5.6 149 A4 Avant 2.0 TDI quattro 125 6-speed Diesel 7.9 5.2 6.2 162 A4 Avant 2.7 TDI 140 6-speed Diesel 8.1 5.2 6.2 164 A4 Avant 2.7 TDI 140 multitronic, CVT Diesel 7.7 5.8 6.5 169 A4 Avant 3.0 TDI quattro 176 6-speed Diesel 8.8 5.5 6.8 176 A4 Avant 3.0 TDI quattro 176 tiptronic, 6-speed Diesel 9.0 6.1 7.2 186 S4 Avant 3.0 TFSI quattro 245 6-speed Premium 13.8 7.5 9.9 229 S4 Avant 3.0 TFSI quattro 245 S tronic, 7-speed Premium 13.8 7.3 9.7 224 Audi A4 allroad quattro A4 allroad quattro 2.0 TFSI 155 S tronic, 7-speed Premium 10.2 6.8 8.1 189 A4 allroad quattro 2.0 TDI 125 6-speed Diesel 7.7 5.7 6.4 169 A4 allroad quattro 3.0 TDI 176 6-speed Diesel 9.6 5.8 7.2 189 A4 allroad quattro 3.0 TDI 176 S tronic, 7-speed Diesel 8.7 6.1 7.1 189 Audi A5 Coupé A5 2.0 TFSI 132 6-speed Premium 9.0 5.2 6.6 154 A5 2.0 TFSI 132 multitronic, CVT Premium 9.4 5.7 7.1 167 A5 2.0 TFSI 155 6-speed Premium 9.0 5.2 6.6 154 A5 2.0 TFSI 155 multitronic, CVT Premium 9.4 5.7 7.1 167 A5 2.0 TFSI quattro 155 6-speed Premium 10.0 5.9 7.4 172 A5 2.0 TFSI quattro 155 S tronic, 7-speed Premium 9.3 6.3 7.4 172 A5 3.2 FSI 195 multitronic, CVT Premium 11.2 6.4 8.2 194 A5 3.2 FSI quattro 195 6-speed Premium 13.0 6.6 8.9 213 A5 3.2 FSI quattro 195 tiptronic, 6-speed Premium 13.0 6.7 9.0 215 A5 2.0 TDI 125 6-speed Diesel 7.1 4.2 5.3 139 A5 2.0 TDI quattro 125 6-speed Diesel 7.6 4.9 5.9 155 A5 2.7 TDI 140 6-speed Diesel 8.1 4.8 6.0 159 A5 2.7 TDI 140 multitronic, CVT Diesel 7.9 5.5 6.4 167 A5 3.0 TDI quattro 176 6-speed Diesel 8.8 5.3 6.6 173 A5 3.0 TDI quattro 176 tiptronic, 6-speed Diesel 8.8 5.9 6.9 182 S5 4.2 quattro 260 6-speed Super Plus 18.1 8.7 12.1 288 S5 4.2 quattro 260 tiptronic, 6-speed Super Plus 15.7 7.9 10.8 256 Audi A5 Cabriolet A5 Cabriolet 2.0 TFSI 132 multitronic, CVT Premium 9.9 6.0 7.4 174 A5 Cabriolet 2.0 TFSI 155 6-speed Premium 9.1 5.4 6.8 159 A5 Cabriolet 2.0 TFSI 155 multitronic, CVT Premium 9.9 6.0 7.4 174 A5 Cabriolet 2.0 TFSI quattro 155 S tronic, 7-speed Premium 9.5 6.6 7.7 177 A5 Cabriolet 3.2 FSI 195 multitronic, CVT Premium 12.1 6.5 8.6 199 A5 Cabriolet 3.2 FSI quattro 195 S tronic, 7-speed Premium 13.8 7.0 9.5 219 A5 Cabriolet 2.7 TDI 140 6-speed Diesel 8.1 5.2 6.2 164 A5 Cabriolet 3.0 TDI quattro 176 S tronic, 7-speed Diesel 8.5 5.8 6.8 179 S5 Cabriolet 3.0 TFSI quattro 245 S tronic, 7-speed Premium 13.8 7.3 9.7 224 Audi Q5 Audi Q5 2.0 TFSI quattro 155 6-speed Premium 10.7 6.8 8.3 192 Audi Q5 2.0 TFSI quattro 155 S tronic, 7-speed Premium 10.4 7.3 8.5 197 Audi Q5 3.2 FSI quattro 199 S tronic, 7-speed Premium 12.3 7.6 9.3 218 Audi Q5 2.0 TDI quattro 125 6-speed Diesel 8.2 5.8 6.7 175 Audi Q5 2.0 TDI quattro 125 S tronic, 7-speed Diesel 8.2 6.0 6.8 179 Audi Q5 3.0 TDI quattro 176 S tronic, 7-speed Diesel 9.2 6.6 7.5 199 Audi A6 Sedan A6 2.0 TFSI 125 6-speed Premium 10.2 5.9 7.5 174 A6 2.0 TFSI 125 multitronic, CVT Premium 10.4 6.1 7.7 179

234

Power output Fuel consumption CO2 emissions Model (kW) Transmission Fuel (l/100 km) (g/km) urban extra urban combined combined A6 2.8 FSI 140 6-speed Premium 12.0 6.1 8.2 191 A6 2.8 FSI 140 multitronic, CVT Premium 12.0 6.3 8.4 195 A6 2.8 FSI quattro 140 6-speed Premium 12.4 6.5 8.7 204 A6 2.8 FSI 162 multitronic, CVT Premium 11.8 6.4 8.4 196 A6 2.8 FSI quattro 162 tiptronic, 6-speed Premium 12.7 6.9 9.0 212 A6 3.0 TFSI quattro 213 tiptronic, 6-speed Premium 13.2 7.1 9.4 219 A6 4.2 FSI quattro 257 tiptronic, 6-speed Super Plus 14.8 7.5 10.2 244 A6 2.0 TDI e 100 6-speed Diesel 7.0 4.3 5.3 139 A6 2.0 TDI 100 multitronic, CVT Diesel 7.3 4.9 5.8 151 A6 2.0 TDI 125 6-speed Diesel 7.5 4.7 5.7 149 A6 2.0 TDI 125 multitronic, CVT Diesel 7.3 5.0 5.8 153 A6 2.7 TDI 140 6-speed Diesel 8.3 5.0 6.2 164 A6 2.7 TDI 140 multitronic, CVT Diesel 8.0 5.5 6.4 169 A6 2.7 TDI quattro 140 tiptronic, 6-speed Diesel 9.4 5.8 7.1 189 A6 3.0 TDI quattro 176 6-speed Diesel 8.9 5.4 6.7 179 A6 3.0 TDI quattro 176 tiptronic, 6-speed Diesel 9.3 5.8 7.1 189 S6 5.2 FSI quattro 320 tiptronic, 6-speed Super Plus 18.5 9.1 12.6 299 Audi A6 Avant A6 Avant 2.0 TFSI 125 6-speed Premium 10.2 5.9 7.5 174 A6 Avant 2.0 TFSI 125 multitronic, CVT Premium 10.5 6.2 7.8 181 A6 Avant 2.8 FSI 140 6-speed Premium 12.0 6.2 8.3 194 A6 Avant 2.8 FSI 140 multitronic, CVT Premium 12.1 6.5 8.6 199 A6 Avant 2.8 quattro 140 6-speed Premium 12.4 6.5 8.7 204 A6 Avant 2.8 FSI 162 multitronic, CVT Premium 12.0 6.5 8.5 197 A6 Avant 2.8 FSI quattro 162 tiptronic, 6-speed Premium 12.8 7.0 9.1 214 A6 Avant 3.0 TFSI quattro 213 tiptronic, 6-speed Premium 13.3 7.2 9.5 223 A6 Avant 4.2 FSI quattro 257 tiptronic, 6-speed Super Plus 14.8 7.5 10.2 244 A6 Avant 2.0 TDI e 100 6-speed Diesel 7.0 4.3 5.3 139 A6 Avant 2.0 TDI 100 multitronic, CVT Diesel 7.5 5.0 5.9 155 A6 Avant 2.0 TDI 125 6-speed Diesel 7.5 4.8 5.8 152 A6 Avant 2.0 TDI 125 multitronic, CVT Diesel 7.4 5.0 5.9 154 A6 Avant 2.7 TDI 140 6-speed Diesel 8.3 5.0 6.2 164 A6 Avant 2.7 TDI 140 multitronic, CVT Diesel 8.1 5.6 6.5 172 A6 Avant 2.7 TDI quattro 140 tiptronic, 6-speed Diesel 9.4 5.8 7.1 189 A6 Avant 3.0 TDI quattro 176 6-speed Diesel 8.9 5.4 6.7 179 A6 Avant 3.0 TDI quattro 176 tiptronic, 6-speed Diesel 9.3 5.8 7.1 189 S6 Avant 5.2 FSI quattro 320 tiptronic, 6-speed Super Plus 18.5 9.1 12.6 299 Audi RS 6 Sedan RS 6 5.0 TFSI quattro 426 tiptronic, 6-speed Premium 20.3 10.2 13.9 331 Audi RS 6 Avant RS 6 Avant 5.0 TFSI quattro 426 tiptronic, 6-speed Premium 20.4 10.3 14.0 333 Audi A6 allroad quattro A6 allroad quattro 3.0 TFSI 213 tiptronic, 6-speed Premium 13.3 7.6 9.7 225 A6 allroad quattro 4.2 FSI 257 tiptronic, 6-speed Super Plus 15.3 8.1 10.8 257 A6 allroad quattro 2.7 TDI 140 tiptronic, 6-speed Diesel 9.9 6.2 7.5 199 A6 allroad quattro 3.0 TDI 176 6-speed Diesel 9.4 5.9 7.2 189 A6 allroad quattro 3.0 TDI 176 tiptronic, 6-speed Diesel 9.7 6.2 7.5 199 Audi Q7 Audi Q7 3.6 FSI quattro 206 tiptronic, 6-speed Super Plus 17.8 9.8 12.7 304 Audi Q7 4.2 FSI quattro 257 tiptronic, 6-speed Super Plus 19.1 10.0 13.3 317 Audi Q7 3.0 TDI quattro 176 tiptronic, 6-speed Diesel 11.3 7.8 9.1 239 Audi Q7 4.2 TDI quattro 240 tiptronic, 6-speed Diesel 14.9 8.9 11.1 294 Audi Q7 V12 TDI quattro Audi Q7 V12 TDI quattro 368 tiptronic, 6-speed Diesel 14.8 9.3 11.3 298 Audi A8 A8 2.8 FSI e 154 multitronic, CVT Premium 11.8 6.3 8.3 199 A8 3.2 FSI 191 multitronic, CVT Premium 14.7 7.1 9.9 234 A8 3.2 FSI quattro 191 tiptronic, 6-speed Premium 16.0 7.8 10.9 259 A8 3.2 FSI LWB 191 multitronic, CVT Premium 14.7 7.1 9.9 234 A8 4.2 FSI quattro 257 tiptronic, 6-speed Super Plus 15.7 8.2 10.9 259 A8 4.2 FSI quattro LWB 257 tiptronic, 6-speed Super Plus 15.7 8.2 10.9 259 A8 3.0 TDI quattro 171 tiptronic, 6-speed Diesel 12.0 6.4 8.4 224 A8 3.0 TDI quattro LWB 171 tiptronic, 6-speed Diesel 12.0 6.4 8.4 224 A8 4.2 TDI quattro 240 tiptronic, 6-speed Diesel 13.3 7.2 9.4 249 A8 4.2 TDI quattro LWB 240 tiptronic, 6-speed Diesel 13.3 7.2 9.4 249 S8 5.2 FSI quattro 331 tiptronic, 6-speed Super Plus 19.5 9.5 13.2 314 12-cylinder Audi A8 A8 W12 quattro 331 tiptronic, 6-speed Super Plus 21.4 10.8 14.7 350 A8 W12 quattro LWB 331 tiptronic, 6-speed Super Plus 20.1 9.8 13.6 324 Audi R8 R8 4.2 FSI quattro 309 6-speed Super Plus 21.2 9.6 13.9 332 R8 4.2 FSI quattro 309 R tronic, 6-speed Super Plus 19.9 9.5 13.3 318 R8 5.2 FSI quattro 386 6-speed Super Plus 22.6 10.2 14.7 351 R8 5.2 FSI quattro 386 R tronic, 6-speed Super Plus 20.7 9.6 13.7 327 Lamborghini Gallardo Lamborghini Gallardo LP 560-4 412 6-speed Super Plus 22.6 10.2 14.7 351 Lamborghini Gallardo LP 560-4 412 e-gear, 6-speed Super Plus 20.7 9.6 13.7 325 Lamborghini Gallardo LP 560-4 Spyder 412 6-speed Super Plus 22.7 10.3 14.8 354 Lamborghini Gallardo LP 560-4 Spyder 412 e-gear, 6-speed Super Plus 20.8 9.7 13.8 330 Lamborghini Murciélago Lamborghini Murciélago LP 640 471 6-speed Super Plus 32.3 15.0 21.3 495 Lamborghini Murciélago LP 640 471 e-gear, 6-speed Super Plus 32.3 15.0 21.3 495 Lamborghini Murciélago LP 640 Roadster 471 6-speed Super Plus 32.3 15.0 21.3 495 Lamborghini Murciélago LP 640 Roadster 471 e-gear, 6-speed Super Plus 32.3 15.0 21.3 495

44gb_GB08_CD_Traeger 20.02.2009 14:25 Uhr Seite 1

AUDIO VIDEO The sound of the rings – eight landmark Audi models spanning the One minute, one brand, millions of fascinating facets: Whether brand’s 100-year history: 1911 Audi Type C (Alpine Victor) in Europe, North America or Asia, people all over the world can /// 1928 Audi Type R (Imperator) /// 1933 Audi Front /// experience the world of Audi simultaneously and discover what 1970 Audi 100 Coupé S /// 1980 Audi quattro /// 1989 Audi 100 TDI makes Audi such a desirable brand, such an attractive employer /// 2008 Audi RS 6 /// 2009 Audi R8 V10 and a global player in the premium market. Immerse yourself in one minute of Audi.

10 0 years of Audi ORIGINS From its very beginnings to the present day: the engine sounds of models that made history. A journey through time, culminating in the exciting world of Audi today.

Read the history of “100 years of Audi” starting on page 114. 10-Year Overview

1999 2000 2001 2002 20031) 20041) 20051) 2006 2007 2008 HGB IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS

Production Cars 626,059 650,850 727,033 735,913 761,582 784,972 811,522 926,180 980,880 1,029,041 Engines 1,266,896 1,187,666 1,225,448 1,284,488 1,342,883 1,485,536 1,695,045 1,895,695 1,915,633 1,901,760

Vehicle sales Audi Group Cars 634,973 919,621 991,444 995,531 1,003,791 971,832 1,045,114 1,135,554 1,200,701 1,223,506 Audi brand Cars 634,708 653,404 726,134 742,128 769,893 779,441 829,109 905,188 964,151 1,003,469 Germany Cars 257,642 239,644 254,866 243,650 237,786 235,092 247,125 257,792 254,014 258,111 Outside Germany Cars 377,066 413,760 471,268 498,478 532,107 544,349 581,984 647,396 710,137 745,358 Outside Germany Percent 59.4 63.3 64.9 67.2 69.1 69.8 70.2 71.5 73.7 74.3 Market share, Germany Percent 6.8 6.9 7.5 7.4 7.4 7.2 7.4 7.6 7.9 8.1 Lamborghini brand Cars 265 296 297 424 1,305 1,592 1,600 2,087 2,406 2,430 Other Volkswagen Group brands Cars — 265,921 265,013 252,979 232,593 190,799 214,405 228,279 234,144 217,607

Employees Average 45,800 49,396 51,141 51,198 52,689 53,144 52,412 52,297 53,347 57,533

From the Income Statement Revenue EUR million 15,146 19,952 22,032 22,603 23,406 24,506 26,591 31,142 33,617 34,196 Cost of materials EUR million 10,155 14,539 15,860 16,726 17,163 17,676 19,139 21,627 23,092 23,430 Personnel costs EUR million 2,291 2,542 2,660 2,739 2,938 3,072 3,136 3,440 3,406 3,709 Personnel costs per employee EUR 50,022 51,456 52,018 53,496 55,763 57,798 59,834 65,771 63,846 64,467 Depreciation and amortization EUR million 945 1,179 1,412 1,614 1,833 1,852 1,930 2,515 2,287 1,908 Proﬁ t before tax EUR million 839 971 1,286 1,219 1,101 1,143 1,310 1,946 2,915 3,177 Proﬁ t after tax EUR million 324 725 747 752 811 871 824 1,343 1,692 2,207

Added value EUR million 3,198 3,590 3,892 4,000 4,287 4,585 4,801 6,156 6,634 7,072

From the Balance Sheet Non-current assets EUR million 3,679 7,039 7,685 8,308 8,588 8,970 8,597 8,285 8,325 9,537 Current assets EUR million 3,024 3,219 3,437 4,342 5,475 5,934 7,515 10,625 14,253 16,519 Equity EUR million 1,441 3,749 4,222 4,761 5,487 5,828 6,104 7,265 8,355 10,328 Liabilities EUR million 5,262 6,509 6,900 7,889 8,576 9,076 10,008 11,645 14,223 15,728 Balance sheet total EUR million 6,703 10,258 11,122 12,650 14,063 14,904 16,112 18,910 22,578 26,056

From the Cash Flow Statement Cash ﬂ ow from operating activities EUR million 1,163 2,058 2,393 2,440 2,786 2,690 3,252 4,428 4,876 4,338 Investing activities2) EUR million —3) 2,502 2,028 2,305 2,015 2,041 1,670 1,890 2,084 2,412 Net liquidity (Dec. 31) EUR million —3) 827 1,093 877 1,530 2,033 3,391 5,720 7,860 9,292

Financial ratios Return on sales before tax Percent 5.5 4.9 5.8 5.4 4.7 4.7 4.9 6.2 8.7 9.3 Equity ratio Percent 21.5 36.5 38.0 37.6 39.0 39.1 37.9 38.4 37.0 39.6

Audi share Share price (year-end price)4) EUR 61.20 59.59 160.00 191.00 225.00 220.15 308.00 540.00 625.00 466.49 Compensatory payment EUR 0.77 1.20 1.30 1.30 1.05 1.05 1.15 1.25 1.80 X5)

1) Financial data adjusted to take account of amendments to IAS 19 and 38 2) Not including securities, ﬁ xed deposits and loans 3) HGB value not shown owing to lack of comparability 4) Year-end price on Munich Stock Exchange 5) In accordance with the resolution to be passed by the Annual General Meeting of Volkswagen AG on April 23, 2009 Form in color: the Audi R8 V10 2009 Financial Calendar